Beersmith water calcs for PM

I don't understand how beersmith comes up with these water quantities.
I told it a 5 gal batch, 4 gal boil, single infusion, no mash-out.

It says
mash-in 5 qt.
sparge 3.5 gal
add water to achieve 4 gal boil volume
(skip to end)
add 1.75 gal (as necessary) to reach 5 gal in fermenter

The mash-in plus sparge = 4.75 gal.
Do the grains soak up (and hold) .75 gal of water or am I not supposed to use all of the sparge water?

At the end, I guess it's figuring I'll lose .75 gal to evaporation.

The grain soaks up about .2 gal of h2o/lb, so for 5 lbs of grain, you'll lose almost a gallon.

not to mention dead space in the mashtun...not s ure if beersmith looks at that or not, but it can matter.