It really, really depends on the class in question. A 5-level prestige class lets you get less benefit/penalty out of certain class aspects. For example, Loremaster gives two extra skill points at each level compared to a Wizard, and gets Use Magic Device as a class skill (not as big of a deal in 3.5). So, if you were to try to make a 5-level version of the Loremaster, with the special abilities coming faster, you'd get less benefit out of this. Also, under the current rules, I think you're not supposed to have Epic progressions for 5-level PrCs. Not a big deal for most people.
On the other hand, 5-level classes are ideal for "dabbling". Take Heirophant; you can get useful spellcasting-related abilities at each level, but most people won't WANT to give up 5 levels of spellcasting power to get all of them. So, some casters might only take 1 level of it, some might take 2, and so on. If you were to make a PrC that gave the Heirophant abilities at the odd levels and "+1 to spellcasting class" at the even levels, it'd be the same for the people who wanted all of the levels, but worse for the dabblers. Also, if all the PrCs in your campaign are 5-level ones, people could take 2 or more complete PrCs before Epic levels, which could give them an unsually high number of powerful class abilities.
Then there's the "opportunity cost". A Wizard who takes 10 levels of Loremaster misses out on two bonus Feats, while if it were only a 5-level class he'd only miss one. A Ranger who took a 5-level version of Horizon Walker would still have decent spellcasting ability. That sort of thing. It makes balance a bit iffy, especially if you have a large number of PrCs available for the players.
So, for most homemade PrCs, you could make them go either way. It takes some balancing work, but it's workable. The bigger problem is the basic concept of Prestige Classes. To some people, a PrC is your ultimate career path; in discussions on these boards you'll hear people who say that no one should take more than one PrC. On the other hand, there are people who mix and match PrCs just like they would core classes. Personally, I'm somewhere in between.
IMC, each player sits down with the DM and designs his PrCs four or five levels in advance, to give him time to integrate it into the campaign and work the balance bugs out; that way, when the time comes, the class is what he wants, so he'll take all 5-10 levels. The class's prerequisites will be tweaked so that the player can meet them, but it'll never just be "okay, tell me what abilities you have and we'll make those the requirements".
However, we've also constructed a few more general 5-level "utility" PrCs. Heirophant is an example of this, but we also made a 5-level Artificer class, with minimal spellcasting gain, but lots of useful item-related abilities. No one's taken all 5 levels of it, although some people plan to eventually. It's a great class to take a level or two of, but no one thinks of themselves as an Artificer, they're a "Crystalsinger with some Artificer abilities" and so on.
The point is, each has their own niche.
