The tailhole I purchased attaches to my hand, is this normal?

This is currently normal, since the tailhole is mostly designed to be linked to either male or female parts. 

Since furry avatars usually have a tail, it would take either the spot away from the tail, or the actual genitals. 

If you however wish to wear it by itself, you can simply change the attach spot by right-clicking it in your inventory and selecting "Attach To".

For further assistance on linking it to other bits, please consult the modding manual or this site.