The sequence of births seem very likely to belong to a single family. However, I would explore a number of hypotheses by tracing the two Williams (birth 1 and 5) forwards; and also searching for another Milman family in the same parish at the same time (which would require two individuals called Ebbet to be married to two individuals with the Milman surname, which is unlikley but not impossible, especially if you're looking at a small pool of potential marriage partners -- for example two cousins named Ebbet after their grandmother marrying two Milman cousins or brothers).
William 5 was born to the same family after the death of William 1, and the name of his father was incorrectly recorded at his baptism, as you are assuming for birth 3. (As an aside, Occam's razor says you should be looking for a single explanation for both these births at the same time, not parking one on the assumption it's just an error in recording; look at the whole picture).
William 5 was born to the same family as William 1, but given the same name even though his elder brother was still alive. (I've seen this happen in other families -- same name but different 'pet' name to distinguish them.)
William 5 was born to a different family.
Ideally, you'll trace both Williams forward all the way to their deaths but as a minimum look for:
- burial records between 1796 and 1805 to see if William 5 was named after William 1 died.
- marriage records for both Williams (early marriages will be in PRs, but if you're lucky there'll be a remarriage for one or both after civil registration began which should give you a father's name.)
- census records from 1841 onwards (will help identify wives and children, and may show you there were two relevant Williams living parallel lives).
- birth records for the children of 1 or both Williams (you're looking for naming patterns).
- birth marriage and death records for William Milman the father of William 5 (can you find any evidence of his existence other than the baptism records).
Suggested by Jan Murphy: As the families are in Devon, there was heavy loss of probate data in the Exeter Blitz, but it might also be worth checking the Devon Wills Index.