I am setting up a Lowrance HDS 5 Gen 1 on my kayak. This unit comes with a power/data cable. Do I need the data cable for anything? (I dont think I do but want to double check) Also, I am wanting to mount the transducer on the inside of the hull. Does anyone have a reason why I shouldn't? I am worried about getting proper water temp readings.

You will not get a good temp reading inside the yak. I use a 1" ram ball attachment and use a bendable arm to drop my ducer down when needed. I have a side image so I had to put it outside which is the best for you too.

Your temp will be compromised if you shot thru the hull. I got a Lowrance thru scupper mount thing that goes thru a scupper and houses the wiring and also serves to mount your transducers to the underside of the hull.

You can do that and get good temp readings or use one of the arm deals as the other poster mentioned.