Purpose of a Pull-Down resistor
Is it really to avoid shorting between the 5v and ground?? So if there is a LED (load) in the circuit when the button is pressed do we really need the pull-down resistor?


A pull-down or pull-up resistor is used to give a floating pin a defined potential. Sometimes it's also used as driving source for serial communications as usually controller pins are better in sinking than in sourcing.


  Also if the button is connected to an external source (5v battery) do we need a pull-down resistor in that case as well??


The type of source doesn't matter.


  One more question, if I have 5 buttons to pin 1-5, So do we just need a common pull down resistor say 100k for the 5 buttons? 


You cannot have a common pull-down because that would mean that you have all input pins connected together, just draw the corresponding schematic and you'll see the problem.