This is some really good dialogue. I wanted to give feedback from the perspective of a Step Parent since you asked that in one of the replies...
I met my wife when her daughter (now mine too, I don't call her "step", I just refer to her as my daughter) was 2.5.
She is now turning 18 (next month). At first I was a little opposite from you. I wanted to have kids, my wife (girlfriend then) had full time custody of her daughter and her biological father was never in the picture.
It was challenging as a young man being with a man with a woman who had a child. We rarely had "alone" time. It was hard to get away together just the two of us.
Early on I had was committed to the whole "just add water instant Dad" idea but as our relationship grew it became more difficult.
I wasn't sure if I could handle it. I didn't think I could ever love her like "my own". I always felt like a 3rd party.
My wife would let me be Dad when things were good, and when things went bad I was just some guy.
Later, I then decided I didn't want to have children (as long as I was with her and her daughter)
I then started to feel like I cheated myself from one of the most marvelous experiences.
I blamed both my wife and her daughter. Even though the decisions were all mine.
As you can imaging this created serious issues for us.
I can go on forever about my story but I want to make sure I got to your original question especially since our stories are kinda similar.
Is honesty the best medicine? Yes. But first the honesty has to start with you.
You said you didn't want kids to now automatically have a 5 year old...why didn't you want kids? If you have some deep reason why this could present problems.
Really think about if you are willing to really really share your fiance (with his child as priority) and take the 2nd seat - where you are not priority, you will never have him all to yourself, where in your young marriage you will not have the acclimation time to just be man and wife. In addition where there is another woman involved (mom), sometimes nagging, sometimes backing out on promises, sometimes causing problems in your family.
This decision isn't like making a new years resolution to lose weight and then pig out when February comes around and no harm no foul.
It's a fully loaded decision AND there is a child involved.
Someone mentioned earlier that you were wrong and he is right. I don't think there is a right or wrong. I think you are both right.
You are right to have the feeling you have and so is he. You are right to question your commitment and so is he. He has every right to make sure that you will be right for him and his daughter. And you have every right to make sure that this situation will be one that you will honestly be able to handle.
You should take some time to yourself away from the situation and really think about it. Feel it.
When you've been able to think about all of this stuff, then get together with him and lay it all out.
A. I can't handle it - so goodbye
B. I love you, I want to be with you, I am willing to work my darndest (nice word huh?) to make this work...and there are some very important things that you need to understand about the way I feel about this situation. It is new to me. It is difficult for me. I don't feel the same way you do about your child...and on and on..flush it out...
After you have given your honest, well thought out thoughts and feelings (if you go with option B) then ask him to give you honest feedback if he loves you enough to work with you through all of the things you just shared.
I assure you, if he does, you both will love and respect each other even more than you do now and your relationship will blossom.
So, yes, honesty is the best medicine! (I may have already said that).