The schematic looks OK to me. However, most regulators will leak some current between input and output when you disconnect the ground wire.What is the current draw of the servo when you are not pulsing it? If it is very low, then there is no point in removing its supply. You could even use 2 or 3 silicon rectifier diodes in series to drop the voltage from 7V to 5V, instead of the regulator (saving the regulator ground pin current).For micropower regulators, I like the MCP1702 series, which has just 2uA quiescent current and is available in a TO92 package.
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