Looks like classic over-watering yellow to me. Snip off those leaves as they will die anyway and don't worry about it. The rest of the plant looks fine.

Why is it still not planted out given your zone?

Dave

PS: Watering isn't a scheduled thing. It is as the plant needs it. Some may need it 2x a week, some 1x a week, some 1x in 10 days. You know if the plant needs it by sticking your finger deep into the soil. If it is cool or damp then it doesn't need water.

How dry should I let them get?

There is no moisture a finger length down in these new pots today. Good to go now? My fingers aren't exceptionally long, and there is still half a pot of space left. Kind of gun shy about watering now.

I didn't plant out yet because here in the Bay Are we have our hottest months in the fall, particularly September and October. I start seeds around the first of April and plant out mid to late May to try to catch that heat. These plants came up exceptionally fast this year. I'm trying to hold them one more week before hardening off and planting out the weekend of the 17th.

Poking your finger in those small pots, does seem to be a good way to determine how dry or moist the soil is :)
I have heard using a wooden popsicle stick( leaving it in. Pull it out and see how far down it is dry. With small seedlings/plants in small pots you cannot afford to let it get dry several inches from top surface.

Even if the plants droop from lack of water they will literally perk up within 5 minutes of watering.