@questionwonder "Hardware, software, MB or monitor issue?"
It sounds like the monitor that can only achieve 4K may not have its DSC setting - display stream compression - turned on.
Is there a setting in the monitor's OSD, or in any LG-supplied control software, that you can check that DSC is enabled?
It may be not turned on for both, but the Macs can mange to support only one monitor uncompressed.
"If I only see 3840 x 2160 as a max resolution in display settings, does that mean that I'm only getting 4K data and not getting my full 5K data that this monitor should provide me..."
Yes, the monitor is not receiving enough video bandwidth from the Mac to support anything higher, like 5K.
This resolution is decided on automatically - the monitors send their EDID available settings to the Mac, and the Mac sends the best signal to the monitor that it can.
The only way to improve matters is to turn on DSC on the monitor, or install new firmware on the monitor which will allow DSC to be active.
One thing to do in both your monitor's OSD (or LG s/w) is disable 165Hz and select 60Hz. If the EDID identifies that a monitor could be set to 165Hz, then any other monitor will only get a much reduced allocation of bandwidth, which will limit it to 4K.
If you have the choice, make sure the monitors are set to DP 1.4a, not DP 2.1, as a USB4 cable doesn't support DP 2.1.