I'm not sure the 120mA max output current of this device is enough for the Arduino. It certainly wouldn't power much of anything in addition to the arduino. I would measure the current draw of the actual circuit (arduino + whatever extras you have connected to it) before I chose a power supply IC that's this small, just to make sure it has enough capacity.
There are similar devices that will provide more current. You're on the right track, just keep looking.
-j