I just did my first BIAB AG, so I'm not going to be a lot of help, but as for your volume goes, a 8.5 gallon pot should work...
Start with a 1:3 ratio of water/grains (1 gallon water to 3 lbs grain), so 3 gallons of water should cover the grains, but if not, add more and keep track for future brews.
Then after the rest, lift the bag and squeeze excess.
Pour your sparge water through the grains to = the beginning boil volume.
Also, especially with BIAB, mill your grains fine. I milled mine too coarse, and lost a lot of efficiency.
Hope that helps.