First, welcome to the 2K5 forums.
As much as I despise Madden, I have to give it credit in regards to franchise/owner mode. Of course, im going by the last Madden which had Shaun Alexander on the cover and it was for PS2/Xbox/GC. I love all the off-season stuff and even Owner Mode in Madden but I never liked the gameplay at all which is why I stayed with 2K5.
2k5's franchise mode is solid but the flaws and problems prevent it from being good to great but if you will be using FINN's editor in order to control all 32 teams during the off-season or at the very least, the Draft, then you can minimize the flaws and problems.
Here's a quick rundown -
Retirement Period - You'll see players retire at season's end and you'll have a chance to re-sign them back for one year. I always liked this option but because 2K5 was the last one, this idea was never expanded like I was hoping. Nothing bad here and if a player you want to sign out of retirement says no, theres a trick around that problem that I have posted somewhere.
Resigning Period - Basically, you can just resign your own FA's or let them leave.
Free Agent Wire - This is good but more times than not, the CPU's signings dont make any sense. Smart thing to do is control all 32 teams and make good signings for each team including your own. There's also a trick that allows you to pay players less money after they accept your offer which is cheating but oh well.
NFL Combine - This is good but should have been expanded on but sadly, 2K5 was the last one so who knows if VC ever was going to do so.
NFL Draft - This is flawed because the CPU only drafts four positions in the first round no matter what. Those four positions are QB, RB, OT and DE. This in my opinion ruins the Draft and the off-season as a whole but you can get around it by using FINN's editor to control all 32 teams.
Rookie Signing Period - Sign your rookies.
After rookie signing is the pre-season. The player progression is all pre-programmed which is a huge negative.
Theres also a feature called Weekly Prep that can be used to increase player attributes and ratings for the upcoming game but resets after each week. Theres a certain formula that works like a charm for those who are into WP. I personally dont like it because its just menu after menu and I dont have the patience or interest in it whatsoever.
The main reason why people like me still play 2K5 over Madden is for the gameplay, presentation, visuals and commentary. While there are those who enjoy 2K5's franchise mode, I must admit that im not one of them and would prefer to play 2K3 which has the same franchise mode but doesnt have the flaws and problems that plague 2K5's franchise mode.
In regards to your other questions -
I keep the simulating at 5 minute quarters which seems to give the best and most realistic stats. During the season, there are some stupid trades by the CPU but they can be avoided by using FINN's editor to either control all 32 teams or by removing the players from the trading block which will prevent the CPU from completing trades. There's not really an major FA's during the season but the Free Agent Wire is random.
The gameplay is what makes 2K5 superior in my opinion. Sure, there are a few minor problems here and there but nothing major that will prevent you from enjoying the game once you get used to the controls and how it plays. Difficulty varies depending on difficulty level, slider set, team ratings, global edits, etc.
I only play on Legend as is and while updating VC's final 2004 roster into what I want it to be and making every team play more like they did in 2004, I have played six exhibition games going 3-3.
Using the Packers, I won 21-14 over the Chargers in SD and beat the Colts in Indy 37-31 which was an OT classic in which neither me nor the CPU had more than a 7 point lead at any time throughout the game. The team ratings really came into play here as I have GB and Indy rated 98 on offense but defensively are 72 and 75 respectively. Manning torched me for over 300 yards and 4 TD's while I passed for over 300 yards with 3 TD's and an INT with Favre. I also rushed for over 100 yards with Ahman Green including an awesome 72 yard TD run up the middle on a missed blitz by Indy.
I also played three exhibition games with the Eagles and lost 24-21 to the Bills in BUF despite Bledsoe throwing four INT's. Lost to the Ravens 24-14 in Baltimore and lost 24-21 to the Bucs in TB even though I scored a TD with under a minute left in regulation.
And earlier today, I played as the Colts beating the Panthers in CAR with a game ending game winning FG 24-21. I passed for almost 400 yards with Manning and 3 TD's but also threw 4 INT's which should have cost me more than it did but Delhomme threw 2 INT's in the 4th quarter which allowed me to tie the game at 21 and then win it with a FG.
Thus far, I havent had a blowout win which for me is rare but I believe having every team's offensive and defensive ratings realistic to what it was for that season makes the game far more challenging and realistic.
Of course, there are several different rosters available in the rosters section and numerous slider sets as well. It's all about finding whats right for you in terms of what you're looking for in the gameplay.
And franchise mode games are tougher than exhibition games are especially since you'll have to account for the random wind and weather. For example, I remember playing the 2005 season with the Eagles and for the life of me, could never beat the Raiders in Philly early in the season. My record was like 2-5 or worse as I dont remember exactly.
2K5 also has its fair share of "cheap" plays but aside from me running with McNabb for a critical first down, I pretty much stay away from all the others.
And give this topic a few days as im sure that you'll get many more responses.