Either way is fine, a lot of admins tend to separate the OS volume from the Application volume.
Personally, if they're not using separate arrays, there is no performance benefit. It is simply a manner of separating the OS and keeping the app elsewhere in the event of an OS failure (reload C and don't affect D).
In addition, I've been a bit annoyed with past admins who separate them, and only leave 10-12 GBs for the OS, and also install apps on C. There comes a time when the updates from MS cause the drive to reach full capacity, and then you play the what can/can't I move over to D to open up some space.
And, if you're using SQL, it is best to have an OS array, a Database array, and a Log array that use separate physical disks.
As for RAID5, we use it on ten to twenty systems at least here, so you should have absolutely 0 trouble so long as your RAID controller is supported.