MarkT:
There are much better linear regulators than the 7805 these days (with low drop-out-voltage particularly, the 7805 needs about 2V above the output).Switchmode regulators save power but can produce a lot of noise (this may affect the analogRead() values).
You can probably find a directly pin-for-pin compatible replacement linear regulator. I can't remember what regulator the Mega uses (mine is inside a metal box on one of my projects, hard to get to!).
Thanks Mark.
For now I have it working again I had to desolder the regulator of the arduino mega.
Now using an external 7805 + heat sink is working again.
Although i dont seem to like very much this setup as its not that elegant and tight. Its running at 51ºC right now on the heat-sink. bit better than before where it was doing nearly 80ºC and voltage droppind down.
Is the regulator I mention in my first post a good option? It is nicely packed, and should coupe with 3A and 12V input is quite convenient.
thanks for all your help.