2:1 is pretty thin. The rule of thumb is 1.5:1 and you can go a little thicker or thinner depending on variables like mash tun size.
Also, 160 seems a little low to me. For my 5 gallon batches, I need to heat to 163 to 168 depending on amount of grain, desired mash temp, and whether I pre-heat the mash tun. I've had two mash tuns and both needed roughly 15 degrees higher than mash temp for strike temp.
At 160, I'm guessing you're mashing in the mid to upper 140s. Which isn't bad, but sometimes you want to be higher, and too low is bad as you won't get the right conditions for enzyme action.
As for sparging, again your water at 170 seems low. Remember, you need to raise the entire bed to 168-172. This means at least 180 if not over 200 to accomplish.
And now to answer your question: Your grain has already soaked up all the water it's going to, so you'd only need to sparge with 3.5 gallons of water.