I use linear voltage regulators all the time and I am a fan of the 7805. Sure, it's not power efficient, but it doesn't have as much ripple as a homebrew beginner SMPS can have.
DIY-ing a discrete SMPS is not for beginners. Not only it is more prone to noise if built on a breadboard or perf board, but care must be taken with component selection and placement. Besides, it usually uses more parts. Even using a switch mode power regulator IC (such as the popular LM2596T-ADJ) requires some knowledge and good design practices.
Therefore, for most beginners or people without a some knowledge in electronics, I suggest just to go ahead and use a linear voltage regulators and be happy! Learn one thing at a time. The OP already did a good job getting his homemade board to work, and that's a lot more than many beginners have accomplished.
To the OP, I just suggest he adds a few bypass caps: before and after the voltage regulator and close to the Atmega328.
Why should you use bypass caps?