No , Z can never be last, V is the only restricted one to 2nd place here, so in theory W,X,Y and Z can be 1st ....
No, you're missing the point. They said, "Start with the choice that has most restrictions, and choose a possible letter each time."
So you first "choose" one for
position 2, which has to be V, leaving 4 letters. Then choose one for
position 5, which has to be W, X, or Y,
That leaves 3 more letters. Suppose you chose Y; then there are W, X, and Z left.
Now choose one of those 3 form
position 1, then one of the remaining 2 for
position 3, and the last one for
position 4.
The counts to be multiplied are the number of choices available
at that point in the process, not the total number of possibilities for
that place.