The 5 kW is much better because it keeps you away from operating at the margin.
A UL Listed interlock (if available for your panel) instead of a trasfer switch is a lot more convenient. It allows any (but not all at the same time) of the circuits in your main panel to be powered by the generator and you don't have to select and re-wire any circuits through a transfer switch. The interlock also costs less than a transfer switch. Mine was about $80 including shipping from a Square D electrical dealer who listed on that famous auction site.
It works as follows on my Square D QO panel.
Installation:
1. Move the breakers in the top two spaces in the right hand column of the panel to a different location.
2. Install a 2-pole breaker of the appropriate size in those spaces and fasten it in place with a device (furnished with the kit) to prevent it from being inadvertantly removed.
3. Connect the generator to the terminals of the new breaker.
4. Mount the interlock kit on the face of the panel cover using a template and fasteners furnished with the kit.
Operation when you want to operate with the generator:
1. Start the generator to let it warm up. (It is not yet powering the house.)
2. Turn off the main breaker, which will now allow the "generator breaker" to be turned on, but don't do it yet.
3. Turn off the breakers or switches to any large loads that will overload the generator, such as A/C, dryer, or 3000 Watts of Christmas lights.
4. Slide the interlock device up and switch on the "generator breaker".
The switchover process takes about 30 seconds. Reverse the process when power is restored.
You now have power to lights, computer, TV, refrigerator, and any other circuit in the house as long as the total load doesn't exceed the capacity of the generator. You will typically not be able to operate large 240 Volt circuits.
You will need to set some rules for the houseold such as no hair dryers, turn out lights when not needed, no toasters, and especially limit multiple uses at the same time. You might not want to operate the microwave and some other big load at the same time.
I have my 5 kW generator hooked up in 120 Volt configuration as described in an earlier post on this thread and tested it by starting a 1 HP motor while a 14,000 BTU wall A/C, the computer, and some lights were all on, and it just kept going without a blink.