So, I know that iOS 5 is coming out today. I haven't even updated my iTouch to 4.3.5 yet so when iOS5 comes out, do I have to update to 4.3.5 and then update to iOS5 or can I just update to iOS 5 without updating to 4.3.5?
You should be fine just updating to iOS 5 from where you are. At least, from what I have experienced in the past. I updated from 3.x to 4.0 a few updates behind in the 3.x dept. and I was fine.
Nope, I am pretty sure itunes will prompt you to update to only the latest version when it is released, so you should go straight to ios 5.