For wheel+pedals you have two options: either Fanatec GT2 + Club Sport Pedals (~$500) or Logitech G27 / DFGT + ECCI pedals (~$650-1000). The Fanatec GT2 and Logitech DFGT both have perfect compatibility with GT5. The G27 has issues.
The goal here is to get a solid wheel, and all three are solid wheels, and pair that wheel with good pedals. Good pedals are hard to find; Logitech's are pretty poor, Fanatec's "CSP"s are said to be top notch. The upcoming Thrustmaster T500RS are rumored to be poor as well, unfortunately. Fortunately, ECCI makes a pedal kit which is compatible with Logitech wheels - but it's pricey, about $550 for just the pedals. Either way, you have options - Fanatec wheel + Fanatec pedal, or Logitech wheel + ECCI pedal.
I personally use a wheel stand instead of full cockpit, to save space. I have the Wheel Stand Pro, and can't recommend it highly enough. The Fanatec Wheel Stand is also considered very good by users. Both fold away with ease. I bought a folding race chair to accompany the stand, which means that I get a full cockpit which folds down easily and weighs maybe 20kg total.
You can get into a very nice setup for a quite reasonable amount of money, it's a nice hobby.