the coder I hired said that it could not be included in the external style sheet

That's not entirely accurate. Almost any type of code can be included in external style sheets -- it's just a matter of settings in the config file if it's an Apache server. Just configure Apache to parse .css files for code such as php.

But most important is what was the purpose of that IE5 detection -- what functionality will potentially be affected without it there?

what was the purpose of that IE5 detection

I'm not sure exactly but it has something to do with the width of the left column of a two-column layout. Can you tell by looking at this?:

External css:

.twoColFixLtHdr #sidebar1 {
float: left;
width: 174px;
margin: 0;
padding: 0 0 0 3px;
}

HTML:

<!--[if IE 5]>
<style type="text/css"> .twoColFixLtHdr #sidebar1 { width: 174px; }</style>
<![endif]-->

nothing to do with the code you pasted.

infact the code you have pasted is superfluous, it is telling ie 5 what is already declared to all.

you need to look at your website stats. if they show you that you still have loads of visitors using IE5 (which is very unlikely) then maybe you'd want to keep it. otherwise scrap it.

The reason I am asking you what functionality will potentially be lost is because if that "style comment line" was written into an old HTML document when IE5 was the current version of IE then it's possible that functionality still doesn't work in version 6 or even 7 yet. So instead of just version 5 to worry about you also have to be concerned about version 6 and 7 too. Then the small market share can add up to 5-6%. That's significant enough to consider leaving it in, or modifying it to include versions 5-7.

Maybe an example will help because this is something I am digging into myself right now as we speak and as you posted that's why I jumped on it so quickly:

I'm in the process of investigating the potential of transitioning to a new way of adding smaller sized images to my html docs by encoding them into Base64 ("data:image/jpeg;base64,/9j/4AAQSkZJR..."). My reason is to cut down on page load times by having fewer HTTP requests sent to my server.

I know that IE5 doesn't support this but neither does IE6 nor IE7. Combined they can account for about 4-5% of market share which for me is still too much to exclude. So I have to write something in php or javascript to detect browsers and serve those IE versions a style sheet with direct image paths (e.g. server/path/images/example.jpg) but for everyone else I will serve encoded ones to increase my site efficiency. And like you said including it in every page is a pain so if I just do the sniffing at the style sheet level with a conditional if statement I can eventually remove that code from only one place when those browsers finally become extinct.

But I don't like mixing code with css so I have to weigh all my options. Hope this helps you understand my question better.

If that's the only code you have for IE5 scrap it, it doesn't define anything you haven't already in your regular style sheet. Also agree check your stats to see if it's worth maintaining. Personally I only style for IE6 and up but, thats based solely on my stats.