Voltage Regulator Heat Concerns
Yes you have calculated the temp correctly, a simple units\dimensional analysis will tell you that.
Your options are:
1) Switch to a DC to DC 7805 drop in compatible regulator. (pricey) 
2) Switch to a different package (more surface area)
3) Put a heatsink on it, this could be as simple as a few square cm's of aluminum to a full blown heat sink with fins on it.