I never ended up in that limbo so i can’t really help you there. However, maybe I can help answer some of the other questions. Where are you finding yourself stuck? Have you applied to a million companies, and nobody got back to you? Or is this more of a hypothetical question that you want answered before applying? For my first job, I moved to a different country. I think a lot of people are afraid to go where the jobs are and that could cause limboproblems.
Anyway, if a jobpost says they are looking for someone with 5+ years experience it usually means they want someone who can hit the ground running. It’s someone that you don’t have to explain the virtues of showing up on time to. Someone who, if told to handle an area, will talk to the right people and get the info needed without being spoonfed. It’s someone who likely has shipped a couple of games and knows all of the stages of the development process. If you were to hand this person a junior or an intern to tutor, it shouldn’t be a problem.
I’d say this is a hard position for someone fresh out of school to take on. But then again, it’s not supercommon for companies to be so specific. On the job board here there are currently five posts with no year requirement at all.
Your demoreel should be the best of your work. Is it? That answer should tell you if you should update it or not.
Generalist, as in 3d generalist? At smaller studios I guess that could be needed, but not if you are applying for a VFX position. A VFX artist is a specialist by nature. Obviously, a knowledge of animation and modeling and so on is required to do it well, but not to an extent where I’d say a generalist generally is 
LinkedIn is a good one to update. It’s lousy with recruiters that can help you get your name to studios who are not openly looking for applicants. It’s also a good place for a summary of your experience. When reading about a potential hire, the LinkedIn is the page I’d check out along with a personal website.