Are you sure about that? Because every place I've called said it takes mercon V, I don't want to put the wrong stuff in it.. I have mercon V in the transfer case..
'98 M5OD takes Mercon (not Mercon V).
However Ford (in cahoots with GM regarding Dexron III too) pulled the licensing of these names around 2007 or so, so now the correct fluid is called "Dex/Merc" by most brands. This is what you want to use.
In my experience, Mercon V causes hard shifting in manual transmissions, my guess is because it's additives are too slippery for the synchros to function correctly (and is likely why companies continue producing the Mercon fluid as Dex/Merc).
Initially Ford said Mercon V was NOT compatible with applications calling for Mercon, then for whatever nonsensical reason they changed their mind on it. They should've just stuck with their original advice. Maybe Merc-V is fine in automatics calling for Mercon, but I will never use it again in a manual.
×2, the M5OD takes right around 2.75 quarts.
Mercon V should not cause any issues in your T-case however (no synchros in the t-case).
Edit:
It just occurred to me the '98 automatic is a 5-speed also, so maybe some clarification is in order since everyone (me included) assumed "5-speed" meant the stickshift. The 5R55E automatic actually does call out for Mercon V fluid.