In your situation (having a kit and needing to cut various sizes from the fabrics) I would look at all the pieces that need to be cut from the first fabric. Figure out how you can make the cuts efficiently. Chances are that you can cut a strip of some size and then cut many of the pieces from that strip, even if they are different sizes. If necessary, diagram it on paper. I've had to do this many times, especially when running out of a particular fabric.
I agree that 5.25" is a strange size square to cut, but perhaps there's a reason for it. I would read through all the directions to convince myself that they really meant 5.25", rather than 5.5". Good luck.