Can "Read and change all your data on the websites you visit" Chrome extensions that require such extensive permissions make me extremely nervous and I don't think I'm alone. Is there a way to build this in a way that didn't require such elevated privileges?
It's been a while since I dabbled in Chrome extensions, but if nothing has changed, then not as a Chrome extension, unfortunately. If you mean theoretically, then of course; Chrome could let extensions subscribe to particular event hooks and whatnot and get very fine-grained about it. I expect that would actually be too fine-grained for most users, but what they have at the moment is a system where installing almost any extension feels quite risky. I'm not sure that Google really want Chrome extensions to exist, though. It feels like a very neglected part of Chrome.