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I used OpenVPN tunneling for privacy from my ISP for a long time now. But recently ive run into an issue where my DNS over the VPN goes to the wrong internal IP.

So I've decided to not block outside DNS in my .ovpn config, but instead I set my routers DNS servers to OpenDNS, Cloudflare DNS, or Google DNS. I understand they cant see the traffic when it is placed under a VPN, but if I use an "anonymous" DNS, do they actually see what websites I'm visiting?

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If you use any dns server whose IP is not routed through the VPN an ISP (or other party who can sniff traffic on the wire) can see what domain names being requested from your routers external IP which somewhat correlates to what websites you are looking at.

In practice, if the traffic to the DNS servers is going over the VPN connection, which is probable (do a tracreroute to see), then your ISP won't be able to see this traffic however other third parties might. In any event [ if you are using Googles servers ], Google will know exactly what DNS queries you are making and will package adverts for your eyes in part based on this information. YMMV may vary with other providers.

DNS is an old protocol and is not encrypt requests or responses.

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