From my experience, you only loose a few degrees of temp over the hour of steeping in the boil kettle. I usually put a towel or two on top of the lid to help retain heat, and if needed, will pour some hot water in from the tea kettle to keep the temp up, but that is rarely needed.
For a quick, hipstery, overview of the gallon batch method go here, I use this method for my gallon brews, and the results have been really good: http://brooklynbrewshop.com/instructions
I haven't tried this, but here is the brew-in-a-bag method: http://www.northernbrewer.com/shop/brewing/biab-brew-in-a-ba...
I have a buddy in a similar situation as yours (kids, no time to brew). He has a killer setup (15 gallon, all-grain), and his solution was to just cut back to brewing a few times a year, and invite some buddies over to help. I think one gallon brews are best left to people in small apartments or for experimentation. In your situation, I would keep in mind the yield-per-time metric. A 15 gallon brew might take a few hours longer than a gallon brew, but it yields 15x more beers. Gallon brews are a good way to keep your brewing instincts sharp, but it won't keep your fridge full.
Before I sold off my brew equipment (that was a very hard thing to do!) I tried to set something up with my friends where they would store the equipment and I'd come over and brew with them. Amazingly no one wanted to at the time, but to this day they are kicking themselves for not taking advantage of it. I had nice quick-release hoses, a Therminator chiller (that is the one piece of equipment I almost kept, prior to that chilling times were killing me!), an nice 15 gallon polar ware brew pot and I was working on getting either a nice gravity setup or getting a stainless steel fermentor. The latter was in consideration because I'd once bounced a 6 gallon glass carboy off my floor accidentally and split my hands open. Not fun! Man, I miss brewing thinking about all that! :)
EDIT: I think once my kids are just a bit older I might be able to get back to a bigger brew. My kids are 6 and 3 so they still need a lot of attention. But I think once the 3 yo is maybe 6 I could probably do a big brew day again.
I got the basic process from http://www.amazon.com/True-Brews-Craft-Fermented-Kombucha/dp.... As a bonus, it also has instructions for mead, sake, kombucha, soda, fruit wines, and kefir. Each section includes a 'master' recipe and then 4 or 5 specific recipes. After a couple of batches, you will start making your own recipes without even thinking about it. I usually get 10 or 11 bottles from a batch, which is perfect for me. I'm not a daily drinker. The watermelon/mint soda combined with a good gin is dangerously good though, watch out for it.
The book uses the two-pot method that pyoung talks about. With such a small volume of water, the temperature is pretty stable, especially if you use gas. I found that the efficiency was a little lower than what I was used to, so I just used a little bit more grain, which increased my batch costs by about 25 cents. I ended up using a small sports cooler that I already had around - I wrap it in a towel and it stays remarkably stable, plus it has a spout on the bottom that makes sparging easier.
IKEA has 3 gallon pots for $12.