On a 5 day trip through Germany and to try and get the feel of the country in this short time, should one hire a car and drive to smaller towns or train to cities such as frankfurt, Munich etc.
Has anyone had experience at either or both?

I've done both, and I prefer driving, but I'd stay in a pretty circumscribed area because 5 days is a very short time. I think I'd pick just a couple of small cities or towns and explore them. I personally prefer Bavaria, as the scenery is really beautiful.

It depends on where you're going, but as a general rule, with 6,000 or so train stations in Germany, you should have no trouble visiting some interesting smaller places by train. If you do as Peg suggests, explore a region, you can usually get around on a daypass ("Laender Ticket", 25 Euros or so for up to 5 people traveling together on regional trains.) Northern Bavaria, Southern Bavaria, the Rhine/Mosel Valley region, and Lower Saxony are just a few of the possibilities.

If you're sitting in a car, you learn nothing about the country you're visiting. The inside of a car looks much the same whichever in any country.
Germany has a very advanced public transport system, and all schedules are on www.bahn.de - it covers trains, buses and boats, and will tell you how to get to any village or hamlet in Germany, as well as almost any railway station elsewhere in Europe.

For just 5 days, a train is probably best as you won't want to visit more than 1 or 2 places.

For a longer trip, train, car, or a combination of train and car can work depending on where you want to go and what you want to see.

I suppose it may somewhat depend on your own definition of "get a feel for the country." Driving would give you one sort of perspective; using public transport a different one.

You seem to be assuming that to get to those "smaller towns" the only or best way is by car and i would disagree with that. You'd have more flexibility with a car but you'd also have the additional costs to include gasoline, and in some cases, parking.

I would agree with picking one area or a few towns and sticking to those regardless of what your transport mode turns out to be.

In the US Army we lived in Germany for 6 years and had our own car. We loved the freedom to travel through the countryside and stay at small bed & breakfast homes. But, the car was a bother the minute you entered even small cities.

We also traveled by train a few times and found it quite a joy. We are going back for 10 days this spring and intend to rely upon the train to visit several towns in Franconia (Wurzburg, Rothenburg, Nurnburg, Bamburg & Regensburg). We will stay at a few locations and make day trips with the inexpensive Bayern Ticket. (the Laender Ticket that someone mentioned).

Regards, Gary