Before i get too far into this this is a NON ISOLATED 5v supply really only for driving a small micro . What this means is you can not connect PC, scopes or any other ground test gear without understanding where and how your earth ground interacts with the circuit. Also it should NEVER be used when there is a chance a user can come into contact with the curcuit.

My equipment:

1:1 isolation transformer this alowes my to safely probe with the scope because it removed the ground from the AC mains.

usb isolator: so i can plug my pc in for debugging with out any real risk.

(note to self add pics)

Ok after about 4 revisions of my psu, and a lot of reading. I came up with this circuit.

Yeah that is right who needs bread board just do it in free air:) Here is the total bom for the psu for $1.16 Yeah, you read the right $1.16 no way you can find a transformer in hobby qty for that price. Also i know i should not solder a fuse but I could not find a holder around.

http://kneale.us/raptor12/ver4/PSU%20BOM.pdf

This curcit is a bit more complex than the cap dropper psu but its still pretty easy to follow.  

The first npn tranistor on the left, is responsible for turning the Mosfet off when the power on the ac gits too high. If you look at an ac sign wave you can see the voltage varies. so when the voltage is below say 0-20v we use that because it is far more manageable heat wise. So use some simple transistor logic: I attach a two 120kohm resistor to the base of the transistor so as the voltage rises it will eventually trigger and force collector low. Now on the mosfet you will see a single 120kohm resistor attached effectively pulling it high all the time. That allows me to chop the low voltage out of the 120v+ Ac signal.

So now we have what should be crude low voltage but but we have the potential for a large spike or other ac glitch to get into our low voltage supply,  That is where the next NPN resistor comes into play. It acts as a current limiting circuit that slowly ramps up the voltage in respect to its gate pin that is slowly charges up via the resistor.

Then a filter cap .22uf in this case, connected to a 10ohm resistor  (just to stop some of the noise) and a zener diode that is being used as a shunt regulator.

Java simulation

http://falstad.com/circuit/#%24+1+5.0E-6+31.41906602856942+38+5.0+50%0Ad+112+176+160+128+1+0.805904783%0Ad+160+128+208+176+1+0.805904783%0Ad+160+224+208+176+1+0.805904783%0Ad+112+176+160+224+1+0.805904783%0Aw+160+128+32+128+0%0Aw+160+224+32+224+0%0Av+32+128+32+224+0+1+50.0+120.0+0.0+0.0+0.5%0Ar+368+96+368+160+0+120000.0%0Ar+288+256+288+304+0+2300.0%0Ag+112+176+112+208+0%0Ag+240+304+240+336+0%0Aw+240+304+288+304+0%0Aw+208+176+208+96+0%0Aw+208+96+288+96+0%0Aw+288+96+368+96+0%0At+320+224+368+224+0+1+0.5406252469140586+0.5763617866721027+100.0%0Aw+368+240+368+304+0%0Aw+368+304+288+304+0%0Ar+448+304+448+224+0+1000.0%0At+512+304+512+224+1+1+0.09040042854836461+0.5160488888260977+100.0%0Aw+512+304+448+304+0%0Aw+496+224+448+224+0%0Aw+448+96+368+96+0%0Ac+560+224+560+304+0+9.999999999999999E-5+4.550066663787357%0Aw+560+224+528+224+0%0Ar+560+224+656+224+0+10.0%0Az+656+304+656+224+1+0.805904783+5.1%0Ar+800+224+800+304+0+100.0%0Aw+752+304+656+304+0%0Ag+656+304+656+352+0%0Aw+560+304+656+304+0%0Af+36...