I've always read this in the way that what Boeing are saying is that you should position the flap lever to the detent that corresponds with the lowest of the split needles on the flap position indicator. So:
Case 1: The lever should be positioned to flap 5 because that is where the lower of the two indicator needles is closest to.
Case 2: The lever should be positioned to flap 2 because that is where the lower of the two indicator needles is closest to.
I think this is what B73C was saying in other words. Hope this helps.