Eiher method works fine. Just make sure that the grains are being steeped at around 155 - 160 for 30-45 minutes, whether the grains are in there while the water heats to that level doesn't really matter. Key is to make sure the water doesn't get too hot, as that extracts tannins.
As to the sparging with 170 degree water, you can do that, you don't need to. It rinses any residual goodness from the grain, but there isn't much left anyway.