My understanding is that you should steep in less than the full boil volume. I've heard numbers of 1 gallon/pound of specialty grains. Supposedly, extra water can lead to tannin extraction.
Personally, now that Im at a full boil, I steep on my stove with 2 Gals (regardless of specialty grain weight) while I bring the rest to boil on my turkey fryer. It does save some time, and no probs in my last 3 batches.