I agree. I have 3 children (aged 10 to 15) and while I did monitor there usage for the first few years, they are all now happily interacting with others on the internet and i have no issues with it because I know they are capable. All three are now trusted to have computers in their own rooms. However, since the OPs child is only 5, I would be vigilant for a few more years. My youngest didn't get full, unsupervised internet access until she was 9 (I still check in occasionally).
Exactly. When we got our first computer, it went in the family room. I was five when we got that computer. Then we got our next one and it stayed in the family room. Then when I was eleven, I got a laptop and it went in my bedroom. There were never any parental controls, or anything like that. I was just monitored for the first few years of using computers, I'm now fourteen. Now my iMac sits in my room, and I've never encountered a predator or anything like that. The point is that you can't go gestapo on your kids, or you'll end up with major issues in the future.
My advice to the OP is that you get a previous gen iMac, and put it in a high traffic area in your home. And keep her computers in a high traffic area until she is tenish. And don't go all gestapo on her. Don't be over protective, but don't let her get on facebook or myspace and that kind of crap yet. Then when she is tenish, mover her computer into her bedroom, and let her do her thing on it. But check in occasionally, but don't put key loggers and crap on it, because that just pisses kids off, and will make them turn against you.
Don