For general purpose work, I set my post square with the world, and develop the needed angle or clearance on the tool, whether it's a hand ground bit or a factory holder. You're quite right, that's too much tool hanging out for a healthy cut. I noticed that you have a lead angle on the tool. If you need a square shoulder on the part, that tool isn't really the right one for the job. It should be ground square enough to face off the shoulder. At times, it may take two different tools to do the job, because a good lead angle can help with chip loading. Then when you get near size, switch to a tool with little or no lead. Or if you really need a square shoulder, even a slight negative lead will help face.