I followed this link on how to create my own yum repository for base install and update purposes. If you notice, why would I need a 5 folder on top of 5.4? My installation at the moment is all 5.4, so when I ran "yum update" it wanted to go to http://domain.com/5/... instead of picking up the 5.4 directory. Is 5 basically 5.4 w/ the most updated packages for that tree? meaning, if 5.5 comes out, 5 would be the latest and greatest and if I wanted to track 5.4, I would still need a 5.4 folder to track changes with?
With my local repo, I follow this convention. That way, I can rsync the latest version without having to manually update all my server's yum.conf when a new version is released.
Updates to the distribution are included within