You are probably mistaking the Windows CE 5.0 project in VS2005 for a Windows Mobile 5.0 project. In order to create a true Windows Mobile 5.0 PocketPC project you will need to install the WM5 SDK. Follow the directions carefully and once you are done you should have a new project type list under the Smart Device node in the "New Project" wizard. It will install new emulators also.
Follow this link for the SDK:
Windows Mobile 5.0 SDK for PocketPC
It is confusing to see the CE 5.0 there in the project types as VS2005 just came out and you would think that the WM5 support and SDK would have been preloaded as an option during the VS2005 install.
Hope this helps!