How much of an issue it is obviously depends on how much teaching the new job expects.
You certainly don't want to just stick with the old letter. Sending evaluations can help (don't look like you weeded out too many, so if you didn't teach much lately, be upfront about it in your letter). You could also send in selected student emails.
I don't see what would be the point of not applying, if you're seriously interested. Even if you don't get the job, letting them know that you're interested is always a plus in case you have another opportunity later. It's unlikely they would dismiss you as uninteresting forever simply because you had an old letter.