I actually figured out the problem last night.
Yes this is my own personal setup, none of Beersmith's matched my setup setup. I also created the mash since I was having this problem.
The problem I had was that in the equipment I entered int "8.00 gallons of kettle top off" by accident. I thought it meant the total volume of the kettle. Once I changed that input, it gave me the correct volume for sparging.
Now I got it set up correctly. I am in the process right now of running a 60 minute boil to try an dial in my evaporation rate so that I can get exactly 5.50 gallons in my fermenter.
I am equating .50 gallons lost to trub and bottle bucket. Is that an accurate estimate? Too high?