Using less than 10 LEDs on LM3914
Does this IC enable using less than 10 LEDs


Yes.


  ... and does it automatically adjust the scale based on the number of LEDs (eg 5)?


No. How would it know?

To do this you would set the reference voltage input to be double the input voltage required for five LEDs. 

For example if you connect the internal 1.25 V reference voltage REF OUT to R HI then you need to attenuate your input signal to 1.25 V / 2 = 0.625 V to get five LEDs. Usually a simple resistor divider will do the trick.