I'm not really sure we're all talking about the same thing when saying ' 5" EE '.
Some think of exactly the small version of the "normal" EE. But then it wouldn't be much cheaper - same technology, just smaller screens.
Some probably already see various Nooks and Barnses, etc.
And there are 5-7" tablets/video players that still do some of the staff you may want from a 5" EE.
Plus smartphones...

So I'd say unless there is a strong pressure from customers it's very unlikely for entourage to manufacture a 5" EE. To much competition, most below $200, only a limited number of potential buyers.

So I agree with various posts here and there that EE (so far) is designed for & sold to students and academics and active readers. (Buy 'active reader' I mean someone who writes a lot on/around their books or who needs to check staff on the Net while reading.) And probably most of those people would say that 10" EE is the smallest practical EE you can have. It needs to be lighter and more batterylife-wise, but that's it.