I currently have large loan of approximately $700,000.00 Dollars at
The rate of 5% per year, this rate is not fixed and floats at 1 over
My banks prime for the next two years. I have talked to the bank and
They will rewrite the loan with a fixed rate of 6.5 % for five years.
What is the best way to go?

I would go 50% 50%.  This is how I normally deal with the situation. 
Do 50% at the 6.5 and allow 50% to float.  This allows you the benefit
of the lower rate, but covers you atleast partaily from a intrest rate
increase.  jd