Hi Amy,
I wish you were asking me this question next year. I also have a five year old, and we are planning on going to Candlelight Processional on our vacation the first week in December. I have seen the show before, without kids, and it is beautiful retelling of the Nativity.
I am looking forward to sharing the experience with my husband and children this year. Like I said, my youngest is 5 (almost 6). She does well sitting for extended periods of time and loves music, so I think she'll really like it. We are opting to do the
Candlelight Dinner Package to cut down on some of the time spent waiting for the show.
I anticipate that the theater will fill up. Thanksgiving is a popular weekend to spend at Walt Disney World. However, the theater only holds so many guests. Once it's full, it's full, so it shouldn't seem over crowded. I will tell you that I know of families with younger children who make a yearly tradition of going to Candlelight Processional. You know your child best; if you think she can handle it, go. If not, you can always just hear the music from a distance.
Hope this helps. Have a magical vacation!