Cyclo used to make derailleurs for 1/8 chains for their 3 speed kits for 3 speed hubs. (3x3). They are very rare now and would not have the reach to cover 5 cogs. And they never did work worth a darn.
You may be able to modify an existing der to take 1/8" chains. Depending on the particular derailleur, you can add a thin washers on each side of each jockey wheel. You would probably need replace the jockey wheel bolts with slightly longer bolts. This is where the "depending" part comes in. Some ders use fairly normal bolts for the jockey wheels, others use special bolts, some have the upper jockey wheel bolt integral to the cage pivot bolt.
This still probably won't get you there. The wider 1/8" chain will hang on the next larger cog on a freewheel intended for 5/32" chains. Older 5 speed freewheels have about the widest spacing but it may not be wide enough.
Some 1/8 chains are wider than others! yeah, what? Aren't all 1/8 chains the same? Yes, on the inside where the 1/8" is measured but some brands have thicker side plates and that makes the outer width wider.
The problem with the master link hanging up is the master link pins on 1/8 chains are slightly longer than the rest of the links. The easy fix is no master link. You would need a chain tool to add the extra links you need anyhow. That brings up another issue. The exact diameter of chain pins varies by 1/10000's of an inch from one brand to another, just enough hat most are not interchangeable. Adding links works best if your donor chain is the same brand.
Best bet is a new bmx sprocket. BMX stuff is pretty common in 1/8 and 5/32.
like this:
http://www.ebay.com/itm/Bicycle-Spr...05&prg=11353&rk=4&rkt=6&sd=390447878322&rt=nc
rick
