A smaller boil avoids having to buy a huge kettle. A full wort boil is really closer to 6.5 or 7 gallons because the boil causes evaporation. A typical kitchen stove has a hard time getting more than 3 gallons up to a rolling boil as well. So, kettle size and capacity of burner are the main reasons extract brewers opt for a smaller boil. It also speeds up the process, since the smaller volume can be boiled and subsequently chilled quicker, and there is less to clean up.
Most people top off the primary fermentor to the desired volume. This also helps cool the wort down to pitching temp faster.
Yes, there are risks to contamination by topping off with water that has not been boiled. Another problem with that is, at least with most city tap water, a chlorine taint can shine through in the finished beer.
To get around this, some brewers buy bottled spring water. Another option is to boil the water the night before, which drives off the chlorine and other bad stuff.
The advantages of a full wort boil - higher hop utilization. In practice this amounts to maybe $0.50 of bittering hops per batch. Owning big kettle feels good too. Mine is 15 gallons so I can do 10 gallon batches. If/when you do step up, go for the biggest kettle you can afford - buy it once, instead of upgrading to a 7, then an 11, then a 15...
