Both the older and the enhanced Gen 5 iPods play gapless music - the song must be gapless in the original recording. You can not change the tags in the information setting to enable it.
http://docs.info.apple.com/article.html?artnum=304362
"Gapless playback is always on in iTunes 7 or later unless the Crossfade feature is turned on. If Crossfade is on, only audio files that have the "Part of a gapless album" option checked and are capable of being played gaplessly will play with no gaps..."
"iPod does not support crossfade playback and only some iPod models support gapless playback. For those models that do, all files that support gapless playback are played gaplessly whether or not the "Part of a gapless album" option is checked.
Supported iPod models (make sure you have the latest iPod Software)
iPod nano (Second Generation)
Fifth Generation iPod
Fifth Generation iPod (Late 2006)"