I kind of think crocheting might be easier than knitting for a five-year-old? I was probably seven or eight when I learned to crochet (that was when some of my friends got into it and taught us), and I started with finger-crochet*. It's pretty simple, though the downside is that you get a lot of tubes that you have to figure out what to do with (decoration? coiled and sewn into hot pads?).
If the five-year-old likes detail work, I remember doing a lot of fuse/
Perler beads though an adult always had to be on-hand for the actual ironing part.
*Now that I think about it, what I learned might have actually been finger-knitting. Either way, I found it a good doorway into actual crochet.
Edit:
Not sure if this is what you're thinking of at all, but there is something to be said for showing a child how to do a basic in-and-out stitch and letting them loose with scraps of fabric to make doll clothes.
I did that some when little - I never produced anything high quality, but I had fun.
Also, re: cross-stitch - this may be what you were thinking of, but they make plastic cross-stitch "fabric" with yarn and big needles for children to start with. I never did latch hook, but I know others did.
Oh, or those potholder looms?