The dilution is a big factor, but not as big as what is in the steeping bag. Grains specified as "steeping grains" do not have the enzymes to convert their starches to sugar. By putting any grains in hot water, you will steep out certain flavor components that will add to the character and color of your beer, but the amount of character they add will be limited with just a steep. If you add "base malt" grain, such as 2-row, then there will be a supply of enzymes that will start converting the available starches to sugars. If you do that, you will start to see more character in the beers, that will make you add more grains and hold the temperature more steady and adjust the volume/ concentration to optimize the enzyme activity, and BOOM, there you are in all-grain land. A junkie like all the rest of us.
I hope you heed my cautions and, more importantly, that your question is answered .