I sometimes think it is creepy when adult men teach martial arts to little kids. Am I overreacting to the news of 'wrestling' with kids?

Who will teach them? I can understand your concern but who else is going to teach them? Other kids? For the most part, martial arts teaches kids discipline, respect, and increases confidence in addition to improving their balance, cardiovascular health, and flexibility - all very positive things. Some schools allow parents to participate in class with their kids, and maybe you would feel more comfortable with that.
Over-reacting. The vast majority of martial arts centers are above board with no sexual connotation.