Thanks for all the input folks. I missed a day here cause I forgot to hit notify for replies.
1 important detail for some of the responses: I'm using a Fio, which runs on 3.3v. Primarily for its size and ease if use with an xbee.
But that aside, I still need a 5v power source for the rest of the system.
From the responses, however, I would imagine the 7805 is the going into a thermal shutdown state, when current is applied. Without load it puts out a steady 4.95vdc.
Right?
I guess I'll look into a Dc to DC converter as jwatte and dan mentions.
Thanks.