Gen5 relates to 500-series of Z-Wave chipset. As in the actual chip inside the controller (or devices). This can never be solved with a software based firmware upgrade.
The 500-series increases range, speed, stability, and support for more features. Z-Wave+ for example is supported by most devices that use a 500-series chipset, which allows Z-Wave to push firmware updates to devices that need it, as well as other features.
If price is relatively the same, then always go for Gen5/500-series items. Full backwards, and forward Z-Wave compatability remains though, so the old stuff can talk to new stuff, and new stuff can talk to old stuff. You simply miss out on some cool new features; without Z-Wave+ firmware updates you have to hook up most devices via USB for example and push the update manually.
In 6 more days HomeSeer will start to finally ship their HomeSeer SmartStick+, which is a Z-Wave+ USB controller that is $39.95 and offers some additional features. It is available for pre-order already. I am moving away from Vera3 to HomeSeer (HomeGenie does not support Z-Wave secure command class so was forced to move to another solution), and the SmartStick+ will allow me to "copy" the Vera3 Z-Wave network, as I totally dread having to unpair, and reconnect 60+ devices (some in hard to reach locations).
