The Window-Based application template is gone in iOS 5.0. Additionally, templates come with ARC on by default. There's been a bit of discussion on some temporary fixes, but now I have a real fix after figuring out how to manipulate the templates. This is now *the* solution to the problem.
Here's how to make yourself fully compatible with the book:
1. Download the following file:
http://www.bignerdranch.com/solutions/Templates.zip
(this URL is case-sensitive)
2. Navigate to ~/Library/Developer/Xcode/ in Finder.
(by default, ~/Library is hidden. You can use the keyboard shortcut Command-Shift-G in the Finder and enter this path to get to that directory)
3. Unzip the Templates.zip file and add the Templates directory it creates to ~/Library/Developer/Xcode
Now, when you create a new project, there will be an option for Window-Based Application.
Enjoy and share.