I tried a Brooklyn Brew Shop 1 gallon kit, and they use 2.5 quarts for the mash, 4 quarts for the sparge, so 1.625 gallons total, and less than what you used. I actually attended a lecture given by them, and noted that they use "around" 1qt per lb of grain, which seems low to me. Not sure why they use a lower ratio. I wound up with around a gallon in total, though, so your kettle is probably what made you lose that much volume. For the next 1 gallon batch I'm definitely going to switch to the method Jawbox mentioned, full-volume no sparge BIAB.
By the way, torbanac, at that lecture they gave samples of single-hop IPAs to show different hop character, and I was pretty amazed by the grapefruit-like character of the Simcoe.