Migrating SQL dump from Drupal 5 into Drupal 7
There isn't any other way to update to Drupal 7, if not following the steps you listed. I would rather update to Drupal 6, and then to Drupal 7.
Probably, you could avoid installing Drupal 5, if you restore the database tables used from Drupal 5; you could start with updating to Drupal 6, if you have a copy of the setting.php file used from Drupal 5 (or you can rebuild it). I have never tried this; it could be working in theory, but have some practical problems I didn't think of. 

Updating the data from Drupal 5 to Drupal 7 means to execute the update functions Drupal runs to update itself. There isn't any other method, since Drupal executes the updates in a specific order, and hook_update_dependencies() implementations change that order.