Trading up for a 5th rounder is definitely odd, but at that point in the draft, I don't think there's really "reaches" any more. Most of the clear-cut NFL talent gets drafted in the first 100 picks or so, and after that, you're just looking for guys that you think can make it.
If I was a GM, I'd play Day 3 picks like they're lotto tickets, where you just want to take as many shots as possible. The draft is a crapshoot in general, and when you're dealing with guys who all have giant holes in their scouting report, it's doubly so.
But word is that James had like a young-CEO type interview with the team. LB is a very mental position, so if you think a guy's got the football IQ and got the dawg to go play it, that's good enough to take a conviction bet on him. I'd rather draft a Zach Thomas type guy at linebacker - all brains, no tools - than a Jaylon Smith type guy who's all tools and no brains.
And as fans watching Youtube videos and looking up Combine results. we don't really get to see the brains. We don't get to interview him with a whiteboard, or talk to his college coaches. The Cowboys have info on a very big part of the LB evaluation process that we don't.
That's the long way of saying, I get the pick.