First of all, I don't think that Paizo was specific enough with their rules for the 5-foot Step action on pg.189 of the Core rulebook. It says:
"You can take a 5-foot step before, during, or after your other actions in the round."
They never specifically stated you could only do it on your turn. That's what was throwing me off at first. Then, I realized it was not listed under Immediate Actions, so I figured that you would have to perform a 5-foot step on your turn only.
Now I'm running into the following problem scenario:
It's a one-on-one fight. One of the characters is a fighter or other warrior type, without the Step Up feat (he/she could be of any class though). The other is a spell-caster. The spell-caster wins initiative and readies his/her action, waits for the fighter to move up to attack (or even charge), then uses his/her action to take a 5-foot step away, while casting a spell. BOOM spell goes off in the fighter's face, without consequence to the spell-caster. Rinse and repeat every round. The wizard is never even touched in a one-on-one fight. Does anyone else see an overlooked exploit here, or is it just me?
I realize that the Step Up feat could negate this, which would make it an automatic purchase at low-level for warrior types, but take a look at the Bestiary. How many melee-tank monsters have the Step Up feat? I could see spell-caster players using this little trick all day against just about any opponent without ranged weapons, unless I'm wrong somewhere in my interpretation of these rules.
The only other thing I can think of to do against this, is move toward your opponent and Ready an action declaring to "attack if the target attempts a 5-foot step", because then, your action would trigger immediately BEFORE the 5-foot step action. But then, why would you use a normal attack action against a spell-caster, that is readying and hasn't moved, ever again?
I'm perplexed....