Is this a good way to power my camera?
The camera likely has a voltage regulator on board between the batteries and the main circuitry.  If you're able to find a part number on that, you should be able to find a datasheet for the part and that will tell you what the max / min input voltages are.

EDIT: I did some googling, and it looks like there is a power adapter you can purchase:

http://www.amazon.com/Canon-ACK-DC30-Adapter-SD700IS-SD800IS/dp/B000EVLS3S

It's bloody expensive, but if you can find some specs on that power adapter, you should have a better idea of what you can supply the camera with safely.

EDIT2* I did some more searching, and it appears as though unit expects around 4.3 volts, so you should be good to go.

http://www.studio3d.com/download/canon_870_user-guide.pdf


  4.3V DC 1.5A


I would think it would be easiest / most robust to just plug your power supply circuit into the DC jack.