Honestly, I was kinda skeptical of Mutt in Indy 4, but at this point I know you can't just rewrite whats been done. And I do see a lot of potential with him for the franchise. While I think that it would be near impossible to replace Harrison Ford as Indy, its not as hard to replace Shia LaBeouf as Mutt. I think a new actor could really help the franchise out and possibly lead to a new era of adventure with Mutts character.
So in Indy 5 I think that you could have him in it with a smaller role, but when you look at how big his role was in Indy 4 its hard to just all of a sudden hand him a small role. So, I think that recasting the character would be a good idea and he could almost be the lead role with Indy as the mentor/Sean Connery role or at the very least a side kick with more character development. I think that a good replacement of Shia LaBeouf would be someone like Dave Franco or even Scott Eastwood. I know that would be a bit of a jump, but I would be really excited to see them develop that character further, just not with Shia LaBeouf as Mutt.