What does "work as dropped stitch" mean in knitting pattern?
That instruction (usually) means the last row at the top of the shoulder on the arm is knit w/ the same stitches as instructed to use thus far, except those two stitches as specified. In the case of the center and 5th, you don't actually "knit" them, not even a 'slip' stitch, which would result in the same number of stitches in that final row, and possibly a 'bump' at the shoulder when joined. You just drop them off the needle. The last row then ends as 3 stitches that are fairly compact, including your cast off, and is similar to doing a small tuck at the top of the arm in sewing so the shoulder is flat. There will be no need to 'gather' together as you sew the arm in place.

That is my first, and strongest, impression of what that instruction is asking. I'm an intermediate to highly skilled knitter, though I wouldn't go so far as to say "expert". I have to admit, that line would have me second guessing the intent of the author. My further thoughts on it, as I considered it a little longer, are as follows:

It seems as if they are instructing you to drop those two stitches as part of casting off, and I must say I do find that highly unusual. The cast off won't add any real "structure" and simply results in your last row being nicely flat, without curling in on you. That gives me the impression of leaving a hole in the very center of the shoulder at the arm seam. A very bulky sweater with chunky yarn may well need that exact thing, though that style of sweater doesn't usually call for a seam at the shoulder at all.

Sometimes, when a pattern calls for a "drp st", I will combine the specified stitch(es) into the previous or next one, and knit both as just one (as in reducing) if the yarn or pattern results in a stretchy/loose type garment style. In that case the 'dropped' stitch can look much more like a 'hole', or can result in a 'pointy' bump at the curve of the shoulder. You will have to judge that for yourself, according to the type of pattern you have.

The way the wording is, as you've given it, I don't blame you for needing clarification. Sometimes different regions will give stitch names like that but can mean something other than what you've learned. If there is a 'legend' of what each stitch name is, usually that 'dropped st' is written as "drpst" or "drp st" with a brief description of how to form it. I would have to see the pattern, go by the instruction style, and maybe determine the area of the world it originated from. I can tell you that 'cast off' does not 'add' a row, but it feels as if they are telling you to knit one more row "before" cast off (?). Depending on the pattern and garment style, of course, but I would err on the side of caution, and try doing a count of the rows you have for the arm and where it attaches, or the number of stitches called for at the circumference before joining. Also, look for a specified number of rows in earlier directions in the pattern, if there are several size options to choose from before starting, etc etc.

I hope that helps, and doesn't give you more confusion. The beauty of knitting, unless the pattern is very advanced and intricate, is the ability to adapt in what you know and are comfortable with. It will still look fabulous. There is so much room for originality.