If you have wondered why we don't ship a Windows CE 5.0 image for the device emulator in Visual Studio 2005 (like we did with the CE 4.1 image in VS.NET 2003), you were not alone ... I've been asking this question, too, also internally here at MS. Of course, we were listening to you. Barry Bond, our emulator guru, just announced the culmination of his work over the last few months: a Board Support Package for the VS2005 Device Emulator that you can use in Platform Builder 5.0 to create an emulator image for the CE 5.0 device that you're building. You can include this image in a device SDK for VS2005 that you can export from PB, for true RAD.
You can download the BSP here - note that it is unsupported.