First of all, there is nothing wrong with getting dropped in a cat 5 race. Pretty much everyone gets dropped in his or her first race.
Did you read the sticky at the top of this forum about how to race? There is a lot of great information there. Based on your description of events, it sounds like you still need to develop your fitness. Racing, crits in particular, are about learning to deal with surges in speed and effort.
Yes, a good starting position is ideal - I think it is better to have a good starting position than one more warm up lap around the course - but it is not everything. As you gain experience, you'll learn how to move through the field without having to waste a bunch of energy.
Finally, don't be too hard on yourself for struggling in the cat 5s. I struggled for a long time just to be able to finish in the pack of a cat 5 race, before figuring out how to finish near the front. (I was one of those people who was not ready to cat up after 10 races.) Yeah, it was demoralizing at times, but then things started clicking for me. Now I'm a 3.