I have an overhead service wire set going from my house to the shop. It looks like (2) 2/0 insulated aluminum wires and (1) bare aluminum. I have been looking for the breaker for it and could not find a wire this thick going into the electrical service panel. I finally found a junction box in the attic. The large service wires go into the attic junction box and two sets of 12/3 Romex carry the load between this box and the service panel through a 30 amp fuse located in the service panel. Obviously, I need to change this. Was thinking of adding 2/0 from the service panel to this junction box (approx 15 ft) and changing the breaker to 100 amp. Can I make a splice this large in the attic or do I need to purchase the expensive service entry wire and run all the way to the shop, approx 300 ft?
Whoever installed this did a good job future-proofing for you. Except for a couple of things.
First, the junction box in the attic was a good move. Yes, you absolutely are allowed to splice in there, provided the box is large enough to accommodate the wires, which have a box fill requirement. There are also rules about grouping conductors.
3-wire run considered bad
The choice of only 3 wires was obsolete. It may have been acceptable at the time of installation, but more recent understanding of safety has led them to mandate grounds also. Typically in your setup the bare steel messenger wire is neutral, which connects to every appliance in your house, guaranteeing weather related electricity fries all your appliances. Great.
I would do one of two things. Either add an insulated neutral wire to that pole line, and re-task the bared steel wire to be the now-required safety ground. Or, fit a transformer at the remote site and derive neutral locally, with the two insulated wires feeding the transformer, and again, re-task the bare wire as ground. I would price it either way.
Paralleling that 12AWG - no, no, no!
You are not allowed to parallel wire at all. It's much more dangerous than you think. So immediately take one of the #12 cables out of service, and re-breaker for 20A until you run larger wire.
Watch your splices. Best to keep heavy wire all aluminum. Lug splices should be aluminum unless both wires are copper.