What I've been doing lately is putting all of my brewing water in my kettle to treat it with brewing salts and a campden tab. Then, before doughing in, I pull out and set aside about 1.75 gals for the sparge. Why 1.75g you ask? Because it fits nicely in my spare 2g stock pot. When the time comes to sparge, I slowly pour about 1/2 of the sparge water over the grain, which usually completely covers the grain and let it drain for a few minutes, then add the remaining sparge water.
Recently, I increased my grain absorption rate in Beersmith so that I don't have to bother with squeezing the bag anymore. I still don't think there is anything wrong with squeezing, but I noticed it was putting stress on the bag, so I thought it might be better to forego squeezing. I use a little more water, but I hit my pre-boil volume with gravity draining alone. I haven't noticed any decrease in efficiency, which has settled in at about 82-83% for most brews, by not squeezing.
Out of curiosity, and to compare to what I do, how much water do you typically have in your kettle, and for what size batches? I'm learning Beersmith so skipped all the volume calcs. I know from previous batches, to get 5.5gals in the fermenter I typically start with 7.5gals of water.
If I could get 80+% and not squeeze I would be a happy camper.