Dark Cherry Stout Help

This will actually be my 2nd ever batch and since the first I have upgraded a few my equipment stocks. I took the chance to purchase a 7.5 gallon brew kettle for future batches, and I have reading about the benefits of doing a full wort boil and how a lot of guys who do all grain recommend it. I think that I'm going to do a full wort boil with my extract kit, which is the Dark Cherry Stout kit from Northern Brewer.

I got the kit tonight and I was starting to plan up my strategy and getting stuff sanitized to get it going this weekend and a thought occured to me, since I'm making a 5 gallon batch, do I want to just start out with 5 gallons in my kettle, start by steeping my grains with the whole 5 gallons and keep going from there? Or do I want to steep them in about 2 gallons and then start adding water and getting it to a boil before I start adding my hops and DME and LME?
Will it matter, or make a significant difference?

Any help on this would be appreciated. Also, I have decided to go with a Chocolate stout, and I was going to put in some Baker's unsweetened chocolate, since this calls for about a 60 min boil, does anyone have a good suggestion about when to maybe add in my chocolate?

I recommend starting out with 6 gallons of water since you will lose about a gallon in an hour long boil. Heat it to about 160 degrees, then steep your grains in the full amount of water.

You might not want to alter the ingredients on your second batch. If you do, then you could add a bit at 5 minutes or so left in the boil.