I would like to assign a button on the Streamdeck Mk2 to the F5 function key on my Macbook Pro. This key starts dictation mode. If I set it to F5 using the Streamdeck app it appears to be issuing the F5 from my BT keyboard (not from the MBP). Is there a way to make this work using KM? That is, can KM simulate hitting the F5 on te MBP rather than the F5 on the BT connected keyboard?
No -- it's "pressing" F5, which might be the marked on the same key as the microphone-marked key but is a different signal.
Your best best might be to change the Dictation shortcut to "normal" keys (System Settings -> Keyboard -> Dictation, "Shortcut") and then send that key chord from your Stream Deck.