I currently brew 2.5g all-grain batches. I use a 5g cooler MLT and a 5g brew kettle. I boil up to 4g in the kettle. For brews under 1.060 I am able the do No-Sparge mashes, and above that I sparge. The thing about my set up is that bottling is quick (makes only 20), I didn't have to upgrade my kettle. I ferment in 3g Better Bottles. I have six of them now: $20 each. My brew day is 3hr 15min usually, which is nice. I can brew after work. Batches are cheap: about $10-20. This is my second year brewing and I brewed 31 batches this year. That is a lot of trial and error. Many styles. I have learned a lot. The downside is that the beer goes quick if you are sharing it.
I am going to get a bigger kettle and MLT next year, but I don't think the 5g cooler was a waste of money. I think I will always brew some 2.5g batches, even after I go to 5g again. Good luck brewing!