I'm a bit confused around the 5MB limit that Local Storage provides. Does this include the caching of images and files determined in a manifest file in a HTML5 APP for example?
The limit for LocalStorage is different from the limit used for Application Cache. Each browser has a different size, and people have found these values by experimenting with examples. You can have a look at these limits on http://grinninggecko.com/developing-cross-platform-html5-offline-app-1/.
There exists a related StackOverflow question about the limit for Application Cache on Cache Manifest Size Limit and Web Apps.