3.3 lbs of LME is enough if you want to scale everything down to 2.5 gallons instead of 5 gallon. If you tried to make a full 5 gallons with that little LME, it is going to taste VERY watered-down.
If you go ahead with the 2.5 gallon batch, you'll also scale the hops down 50%, so you'd add 0.5 oz of the Hallertau. You don't steep the hops, you boil them. The entire 0.5 oz Hallertau addition would go in at the beginning of the boil for a Wit, and boil for the whole 60 min.
If you add honey, add it immediately AFTER the boil, not in secondary. Actual honey is pretty hit or miss on what flavors it contributes to the beer, depending mostly on the florals the honey was made from. What honey WILL do is dry out the beer and bump the ABV a bit, so you don't want to overdo it. About 8 fluid oz in a 2.5 gallon batch would be fine. Honey is VERY sanitary, and will be pasteurized when you add it to the hot wort after the boil, so no need to sanitize it.
BTW, if you scale down to the 2.5 gallons, you DO NOT scale down the yeast. Use the whole packet either way.
Hope all that helps!