If you steep a small amount of specialty grains in a large amount of water (dilute steep) the pH will be too high. The small amount of grains added to a full boil volume is not sufficient to lower the pH enough to keep from extracting excess tannins, which can lead to an astringent taste.
I read a great article from Chris Colby in BYO magazine on the subject. He recommends steeping specialty grains in 1-3 qts of water per pound of grain at 148˚- 162˚F for 30 minutes in a separate pot while heating the main boil kettle. You can then just add the grain tea to the main boil kettle. You can also put the spent grains in a strainer and rinse them, to get more goodies, with an even smaller amount of water (.5 qts/lb) heated to a similar temp into the boil kettle, again to reduce excess tannin extraction,
Another rinsing method he suggests, and is what I do with great results, is to add up to 2 qts of water per pound of grain, heated to the same temp as the grain tea, into the grain tea, and rinse the grain bag in a strainer into the brew kettle with that entire amount of liquid. This method allows for a larger rinsing volume, without extracting excess tannins due to the relatively high pH of the grain tea.
What ever method you choose, just heat an amount of water in the main boil kettle so that when you add the liquid from your steeping and rinsing process you end up with your desired pre-boil volume. Hope this helps.