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According to the README, it seems like only the transactions sent from local RPC to the daemon get propagated through Tor. I am unable to understand why this choice was made/what its advantages may be. One advantage I can think of is that it would prevent a MITM in the circuit established between the sender and the receiver.
Also does the daemon relay the transaction only to other Tor nodes or do they relay information to all nodes in the Monero network?
Anonymity networks make sense for remote nodes, not local. The monerod runs in the data center and wallets @home or mobile phone. Here & here you can find some public .onion nodes.
Your linked README is out of date and contains the link to ANONYMITY_NETWORKS. Hint: monerod includes now addresses of I2P and Tor seed nodes. See: add support for i2p and tor seed nodes
therefore --add-peer or --add-exclusive-node is no longer absolutely necessary.
monerod RPC & P2P port can be set up as a hidden service and you can connect your Monero (GUI|CLI|RPC) wallet over Tor to it.
The monerod P2P and blockchain synchronization will continue to be done via Clearnet as well. If any anonymity network is enabled, (inbound connections --anonymous-inbound and outbound connections --tx-proxy) transactions being broadcast that lack a valid "context" (i.e. the transaction did not come from a p2p connection), will only be sent to peers on anonymity networks.
Simplified: P2P blockchain download & sync only over IPv4 because of sybil resistance and security. RPC & transactions can be done via IP, IPv6, Tor and I2P. Excellent monerod-reference
