I think the question whether to stay in a 2BR condo or a WDW hotel is more than about price or staying on site. If having a kitchen and the extra bedroom is very high on your importance list, then that's the way to go. We stay in rented timeshares alot when we travel, and once you do that, it's tough to go back. That said, we don't stay in our rooms near as much at WDW, so I'd rather stay in a hotel onsite.
You'll see references to "DVC," which is disneys version of timeshares. These are on-site resorts that are like mini condos -- studios, one bedrooms and two bedrooms. You can book these directly through disney or save some money by renting them (or renting "points") from DVC members. The problem is that you have 5 in your group. I think that most if not all of the DVC resorts allow a maximum of 4 in a one bedroom, which means you'd have to have a 2 bedroom. Even renting points, in July a 2 BR would cost you between $350 and $700 a night, depending on whether it's a weekday or weekend. Another option would be "cabins" in the campground area of disney, called "Fort Wilderness." these are very well done, fully appointed and furnished 1BR cabins that go for about $300 a night during your dates.
For the onsite hotels, the full non-discounted (or "rack rates") for your time of year for moderates should be in the neighborhood of $170 to $220 per night depending on view. For deluxes, figure $300 to $500 (and even higher for concierge and stuff). Through using the various moneysaving tips codes and advice here and on mousesavers, you can probably save as much as 15 percent off these rates; maybe a little more, but there's no shortcut for the research.
If you want to stay onsite with 5 in a room, I think the best values, taking everything into consideration, are the Wilderness Lodge -- about $250 a night before any discounts, or the Contemporary Garden rooms -- about $280 or so before any discounts (give or take $10 or $20).