I have a Nexus device with Jelly Bean installed. Can I flash directly to a Lollipop image or should I update to KitKat and then flash Lollipop?
If you are flashing a factory image then you can skip KitKat and go straight to Lollipop (Assuming it is available for your device). Factory images will completely wipe your device and install the image, so are not dependent on the previously installed OS.
If you are wanting to use OTA updates then you don't have any choice what updates to install as they will be automatically provided to you.