I have never tested the validity of this advice, but I have seen it recommended that you not exceed one gallon per pound of grain when steeping. Personally, I have had good success with about 2 quarts per pound for the steep, followed by a sparge with an equal amount. Then top up with water to reach your boil volume (if required).
As Orfy says, you might consider going AG if you already have full boil capacity. A cooler-based mash tun costs very little to make, and assuming you have a chiller and a thermometer already, you probably don't need much else (except a bit more time on your brew day!).
When doing a full boil, do you steep grains in a volume a couple gals. less than full, or do you just steep in a couple gals. then add to full volume? I'm not sure it makes much difference. I'm making a 7.5 gallon batch so I will steep in 5 Gals. then rinse grains with 2.5 gals of 170+ water. Then I will put in 2# extract and follow hop schedule and add the rest of extract at 15mins. to go 
78 degrees, pitched 2 Safale US 05 pkgs. 
