Show multiple user pictures on view of nodes that have user's flagged to them.

There is no built-in way to group together multiple pictures or to limit it to just 5 showing. The only thing you can do is show the same row once for every user that has flagged a piece of content. So if you have 5 pieces of content flagged 10 times each, you'll get a listing that has 50 rows (the same node 10 times each, just with different pictures). Doing any sort of "group by X and limit to 5" is something that's just not possible with a single SQL query (without using sub-queries). If you're comfortable with theming you can loop through the results and make them appear as single, grouped rows, but it's likely that you'll end up with an excessive number of entries, since there's still no way to limit to "5 people that have flagged this node", you'll always get all of them.

Something you might try is using the http://drupal.org/project/gallery_summary module, which makes it so that it actually executes one query to build a list of nodes, then another query per row to show a list of who's flagged each node (which you can limit to 5 since now it's doing multiple queries). It's a brand new module so documentation might be a little short.

That sounds like plan. A little scary, but a plan ;-).

Internally that's exactly what Gallery Summary does, calling views_embed_view() internally for every row in the results. Sounds like it'll likely work.