You were talking about the specialty GRAINS then, not malt... Different items... When you're brewing extract, the extract is the malt... The grains are for the extra flavors you won't get from the extract... 1/2# of grain won't displace all that much volume...
You can use aluminum pots for brewing... Just make sure you condition it before you use it for the first time (boil as much water as you can in it for at least 30 minutes and then leave the black coating on it. Don't scrub it off in the future, it also makes cleaning much easier)...
I still think you should contact where you got the kit from to find out their suggestions... I only did partial boils when brewing extract (all of three batches). Since I went to all grain, I boil full batch size. If you use some fermcap-s in the boil, you'll be able to fit more water into the pot... Also, you don't have the grains in there for the boil. So you should be able to process them (at the lower temps), pull them out, top off and then add the extract...