You want an 8 1/2" block composed of 4 HSTs? If I read it correctly, you need each HST to be 4 1/2". Cut your squares 5 1/2 inches, put two together, draw a diagonal line and sew 1/4 on either side. Cut on the line. Press and trim the HST to 4 1/2". When you take away 1/2 for the seam there's your 8 1/2".
You can add 1/2" and cut the squares 5", but it takes very exact sewing. The previous poster was right - usually a pattern will say add 7/8", but 1" is easier to measure and either way you have to trim so I prefer to use 1".