"So the .rsr file goes to props. Is this in the runtime folder or just poser 5?"

Neither. (I know, it's confusing, innit?)

Move both the .obj file and the .mtl file into a folder of your choice within the Runtime/Geometries folder. Ignore (or otherwise throw away) the .rsr file.

Start Poser. Go to File->Import, select the "Wavefront .obj" option, then navigate to where you save the prop (you know where to start: Runtime/Geometries...)

Import the prop. You'll get a dialogue with several options. For now accept the defaults and click OK.

The prop should load into Poser, stage centre, on the ground, at average Figure height.

You can now select the prop (I'd suggest you point the main cam at it and set up a reasonable point of view - zoom in/out as necessary), open the Props library and click on the little "+" button at the bottom and, after responding to the "name" dialogue that follows, the prop will be saved to the library (as a PP2 file). The current Preview will be used as your Icon for the prop (that'll become a .PNG file with the same name as you've given the prop).
This will save the whole prop (including the geometry) into the props folder. You can now load that prop directly from the Props library.

Some advice:

1. Unless the prop is approximately figure-sized then it is better to scale it down to whatever is nearer normal after loading into Poser and before saving to Library. Sometimes it is better to uncheck "% of figure size" when loading the .obj and re-scale from there (eg, a ring for a finger would come in huge if at 100% of figure scale and probably couldn't be reduce easily to a managable size).
2. You can create your own sub-directories in the Props library by clicking on the little triange at the top-left of  the props library and selecting "New Category" (last item in the drop-down list).

Cheers,
Diolma