Bill:
I'm aware of the issues with using a linear regulator; that's why I asked what it was, it wasn't clear from the datasheet.
I'm also aware of buck converters. There's one on Sparkfun that uses a similar design to the one you suggest, with one chip and one inductor per LED, but they're $20 each and I was wondering if there was a way to make them more cheaply.
By the way, in my search, I came across this chip:
That chip can only supply 150mA per channel, but you only need the one chip to control three LEDs. You also need only a single inductor. It does seem to require four microcontroller pins though, unless you can drive a differential input with one pin tied to ground? I'm not sure.
At $0.25 per inductor and $1 per chip for those chips you suggested that's $3.75 for parts, plus the cost of placing three times as many components. With the 5970, the cost of the chip is $3.23, and the inductor for it is $0.20, so your total BOM is a little over $3.43. Not a huge difference, but remember, you're placing 3x fewer components and assembly costs go up with increased component count. Also, if you're looking to make your board as small as possible, 3x fewer components will go a long way towards achieving that, and as the 5970 operates at 1.5mhz the inductor it needs is much smaller.
The only downsides are that differential interface and the lower current handling capacity. If someone knows if you can drive differential pins like that with a single IO pin somehow that would be nice to know.