Can I repurpose existing cat5 telephone line for Ethernet networking?
I think you may be suspecting that the existing telephone wiring is CAT5 cable when in fact it may not be CAT5 at all. Four pair telephone wire can look a lot like CAT5 cable when in fact it is constructed in a different manner. The wire gauge may be different and the characteristic impedance of the cable may be different. Also note that cable specified for data comm such as Ethernet have special twist specifications for each pair in the cable that are different from one another. 

Very short run Ethernet over improper cable can be made to work but when you start talking about trying to send the signals over a respectable distance then factors such as wire gauge, characteristic impedance and elimination of impedance discontinuity on the wire run can play a huge role in the success of the connection. I can say with pretty good assurance that the use of the twisted splices that you described making are certain to represent a nasty impedance discontinuity in the cable run. These can cause signal reflections in the cable can result in significant loss of signal strength and quality at the receiving end of the cable. Remember that 100 MBit Ethernet is an RF signal and the attributes that I mention for the transmission line need to be good quality and to design specifications for it to work properly.