If I have a limit of 5 keywords, does this mean I can only create 5 projects

No, it means that you can have as many ACTIVE projects as you wish (1,2,3,4 or 5) monitoring no more than 5 keywords in total. You can always  delete old projects/keyword and replace them with new ones as you go.

You can also increase your number of keywords or upgrade your account from your Account Settings.