This smells Cthulhuian
Masses of writhing bits, forced together by some unnatural force....
Seriously, if you are only using 5 bits out of eight, there is a good chance that your overflow won't hurt anyone. I'm betting there is a LOT of sloppy programming practice that is going to be exposed (over the course of decades) by going this route.
I appreciate that FPGA are bit-tight. But when you start doing arithmetic, (and not just logic) things tend to get messy.
I appreciate the desire to avoid wasting bits. I also appreciate the horrors that get created when we start bit-cramming.