For "premashed" specialty malts like crystal malt, you can steep in 2 quarts or 5 gallons, and will get the same effect, so I don't see any advantage to making it harder for yourself.
I don't use hops bags, or rather I didn't use them until I got a new system where whole hops plug up my pump. I still don't always use bags, and instead use a filtering setup in my boil kettle to catch the bigger chunks, but it doesn't matter either way. You can bag, but if you do make sure that the hops are very loose in the bag and the wort freely contacts all the hops. Use two bags if you need to (or more) so that they are not packed in a bag.
If I was making that beer, I'd steep my grains and then remove them. Bring the wort to a boil and add about half the DME. I like using about 1 pound of DME per gallon of wort boiled, more or less, and it gives great results. I don't sweat the exact amount- "about" works out fine. Then I'd add the rest of the extract at flame out and whisk it in well before chilling.
Broken Leg Brewery
Giving beer a leg to stand on since 2006