That's the same freeking regulator everyone else uses (or one with the just about the same specs). As we've all said, a linear regulator dissipates all of the energy from the voltage step-down as heat. A switching DC-DC converter doesn't. If you use any linear regulator to step down a large enough voltage with a large enough current draw, it will get hot unless you have a massive, air-cooled heat sink. I've worked with some guys who have designed a high-cell count supply with linear regulators and to supply the current required by a normal RC system, the heat sinks were massive. If you don't keep it from getting too hot, you will get thermal cutoff and that's the end of the airplane - period. I've seen it happen.

As for all of the rest, silicon is actually a fairly good conductor of heat, its simply that the IC is small and thus the power density is quite high. Getting all of that heat through the small contact area of the back of the IC is a challenge. Then you have to have a large enough heat sink to dissipate it into the air...