I've taken the plunge

I have put together an all grain system to do 10 gal batches and this forum along with the interweb have really helped me along the way. I am so excited to test the new works and as soon as my citra comes in I'm gonna give a go on 10 gal of a zombie dust clone from this forum with some tweaks of course. I guess my question is... As far as fly spargeing... am I correct to assume that i need to maintain about 1-2" of hot water above the grain bed and match closely the rate at which the wort drains to the BK? And if so what temp should my sparge water be ? Do I start after the 60 min mash or do I mash out before hand any recommendations?

Mash out first so you can denature the enzymes and maintain the profile you're looking for. A mash out will also help you dissolve more sugars thus increasing efficiency. I try to have my sparge water at 170 because I lose a little heat between my HLT and MLT. If you mash high 156-158 then 40-45 minutes will be plenty of time to complete conversion and if you mash below 150 you may want to go longer. You are correct about maintaining water 1-2" above the grain. I think you sound ready to go, have fun!

How many gallons do you typically use to mash out with?

For a 5G batch it usually takes about 2G at near boiling. When I brew 10G batches I max out my mash tun so I have to draw off around 2.5G boil it and add it back. I use Beersmith to calculate my mash numbers, it is definitely worth the money. FWIW I always fly sparge. Some guys who batch sparge claim they do not need a mash out, so if you intend to use that approach you might want to get some info from those guys.

Boil 2.5 gal of the wort right? Then use that to mash out? I too intend on fly spargeing cause I've got the equipment

Correct. You should really consider some software to help you dial in the correct volumes.

Ive now got beersmith... when I was asking these questions the webpage was down... Problem solved now. Thanks

Don't add back any high gravity wort to sparge with. Its not going to grab anymore sugars and if anything you may lose efficiency.
Also, you are correct in maintaining a 1-2" water level above the grain bed. If it gets too high you may compact the bed and cause channeling.
Lastly, you can sparge with cold water, it doesn't make any difference to the efficiency gained hot or cold surprisingly. I will use cold water for the last 5 gallon sparge, it extends the time to boil a little, but why waste all the heat on the spent grain? Plus I would have to use energy to heat the water in the first place.