I concur with the others regarding 401k & IRA. If you have an employer match on your 401k, absolutely take advantage of that to its full extent. Otherwise, you're effectively taking a voluntary pay cut. Then I'd max out your Roth IRA. And then don't touch these accounts until age 59 or whatever.
What's left is what you can put in your "5 year fund". And for that, I like Nords's idea of CDs. Or you can also look at "high" yield checking/savings accounts (e.g. ING Direct, Ally Bank). Or if you want to take on a little more risk, you can look at tax-free bonds or bond funds. Check out Vanguard's VWIUX or VWSUX: Intermediate- and Short-term tax-exempt funds, respectively. Of course there is always interest rate risk with bonds; but the risk decreases as the term declines---but so does the coupon!
There's no perfect solution, and in the end it's back to the classic question of risk versus reward. There's no "right" answer; it's based on your personal risk tolerance.
Equities are at or near an all-time high. This trend could continue for five years or it could crash tomorrow (well, tomorrow is unlikely, but Monday is possible :) ).
Perhaps another way to think about it is this: for this particular pool of money (but not your overall portfolio), your profile looks like that of someone nearing traditional retirement age, when the general advice talks about wealth preservation rather than wealth building. Likewise, your portfolio becomes more bond-weighted, but still contains some equity portion. So maybe you could do something like 30/70 equities/bonds.