Hi Beth, i'm also 5 foot 3 and have a K5. When i first sat on it in the show room it felt really tall so i had it lowered using the longer dog bones and dropping the front forks through. I now can get my feet, not flat on the ground but firmly and safely planted. I have just got used to automatically shifting my bum on the seat as i come to a stop so that i put my left foot flat on the floor as i stop and the right one stays on the back brake. Fortunatly the SV isn't to heavy and is easy to hold like this. I never got a lowered seat but obviously that would make life even easier.
I also understand your comment about the foot pegs being at calf hieght. When i first got the SV my left calf was black and blue because when i came to a stop i had to put my foot down in front of the peg cos thats where it automatically landed. Then as i pulled away the peg caught my leg. I soon learnt to move my leg behind the peg whilst i was stationary.
As for the handling i obviously don't notice anything cos it's all i'm used to but Fizz rides my bike alot and also has an SV, the only thing he noticed was it turns into corners a little bit slower, but nothing that was a problem or made it awkward to ride.
The SV is definatly do-able for you, try and find some one near you with a lowered one and have a sit on it. If you get one i'm sure you'll love it.
Also as mentioned above, Boot selection is crucial, I changed from a pair of Sidi Black Rains to a pair of Alpinestars SMX3's the alpinstars have a thicker sole and its easier to get my foot down now.