Do graduate schools dislike when students take 5 years in undergrad? I am currently a junior Materials Science and Engineering major at a top engineering university, and have done research in a very physics-based materials science lab for the past two years. I love this research, and plan to continue in the field for graduate school, but I am realizing more and more that I will need to strengthen my physics background significantly. 

I have the option to double major in physics, which I can also use as part of the requirements for the honors program I am in, but it will mean taking an extra year to graduate (5 years instead of 4). 

I am honestly OK with taking a bit more time in undergrad., as I have had a wonderful experience so far, but I want to be sure it is not frowned upon by top graduate schools (in either MatSE or Applied Physics) that I am taking 5 years instead of 4. Is this usually the case?
You want to make a double major program, I don't know the issues in your university but here they still finish their own undergraduate degree in time and took their diploma, and in their extra year solely took courses of double major. So actually no extra year in the curriculum as a result. 
Still, graduate schools demand explanations for an extra year. I have finished Chemistry (4 years) in 6 years in my university. First 2 years are simply filled with N/A or FF grades of retaken courses. I was unable to attend my classes and even most of the exams due to the economic reasons. Most of the time I had worked in places with more than 40 hours in a week, and sometimes 17 hours a day for most of the week. 

In short, if you prove to graduate schools you applied, that you have an extra year not because of incompetence or other serious lackings, but due to living conditions or meaningful academic reasons; they will tolerate that. However, be wary of some schools which count your retaken/replaced courses as another course in your curriculum, so in their way of calculating your GPA might be worse.