5 bits is adequate for a lot of things. For a very odd example, check out some of the demos performed on PC-XT, NES or GameBoy. These are, roughly speaking and IIRC, 1, 2.3 and 3 bits, depending on just how you use them. The trick is high sample rate and dithering.
A 5-bit DAC doesn't sound too useful, but it becomes damn powerful if you have DMA updating it from a buffer at high rate, or dithering registers perhaps. I haven't looked to see if the PIC examples offer this. Even without DMA, if you have a periodic interrupt and fast interrupt response, you can do the same in software (which is probably something PIC and AVR are quite comfortable with).
5 bits is more than enough for some basic control functions. Display brightness/contrast, say. Trimming a supply voltage (but probably not setting an absolute voltage). Conversely, a rotary encoder might have about as many steps (32 or 64, depending on how it's decoded) to still deliver comfortable digital action; anything outputting in a similar way will only need as much.
What else; spacial resolution, that's as many pixels as a 4-line character-based display. Not great, but definitely useful.
Tim