James:
The consideration to look at is the power capability of the package, the thermal impedance to the copper of the power bus traces to the part on the PC board, and how much power you are actually dissapating in the part. The power going up in heat is computed by measuring Vin to the regulator and the Vout. Subtract these and then multiply by the current. This gives you the Watts going into heat. My general feeling is that you ought to measure the part case temp when the PCBA is enclosed in its actual packaging. This will tell you if the part is running too hot or not. But if it is hot to the touch just in the open then it is possible that it is running at too much dissapation. The temp of the part being too high can lead to premature failure of the regulator, thermal cutout on those regulators with thermal protection built in, and finally aging of the surface mount solder connections which can crystalize at high heat and lead to an eventual increase in connection resistance and evential failure.

With a linear regulator, the best way to run the parts cooler is to lower the input voltage to the part. It is all too easy to grab an unregulated wall wart for a power source and regulate this down to 5 volts without realizing that the wall wart may be putting out 12 or 14 volts !! I have recently found it very effective to use a low drop out regulator (LDO) to locally regulate the +5V requirement and then have the power source come from a wall wart of the switcher type. These are themselves regulated so you can select one that outputs say 6 or 7 volts (you pick based on your LDO's requirements and the drop in the connection wiring) and thus know you have tight control over the head voltage to your regulator.

This scheme has gotton to be important as the regulators become smaller and smaller.

Michael Karas