Sorry, this is for a full extract. Should've clarified.
If you are going for flavor extraction you'll need to steep. This also can be done in an extra pot or in all
the hot water before you add the extract. It really doesn't matter how much water you use when steeping- I like to do it in as much water as possible in order to extract as much from the grain as possible. I guess it is possible to use too little.
I would steep with the lid on in order to conserve and maintain the temperature- you could even do it in the oven set on warm- which is usually around 150F. Be sure you bring the steep to temp before you place the pot in the oven or you will be waiting a long time.
If you include 2 or 6-row base malt or any type of base malt it will require mashing even if it is just a couple pounds. Then you will need to observe the proper mashing ratios of 1.25-2 quarts of water per pound of grain. This can also be done separately and added to the extract.
My previous point was that there is a difference in grain and whether or not you can steep or need to mash or some combination of the two.