Hi Red Cap, sorry to hear about your poor fish.
I suspect you may have had a water quality issue in addition to the nipping problem. You said the tank had only been running a few days... I would expect to see ammonia and possibly nitrite appearing during that time, especially as 5 gallons is too small for 2 goldfish, even tiny ones. The blisters and scars you described could possibly have been ammonia burns rather than physical wounds. The nipping may even have been caused by stress. I would give your nippy fish another chance and see how he does.

Goldies need a minimum of 10 gallons per fish (20 gallons each for commons, comets and shubunkins), even when they are young because this is when they need really clean water and room to grow and develop properly. I would not recommend you get any more goldfish until you have a larger tank, especially not shubunkins as they need TONS of space. They are really pond fish, not tank fish.
Hope this helps.