Linear regulators only source current and will fry with very small reverse current of output voltage greater than the input. Then they short out. If they don't have OVP and /or a reverse diode clamp.
I guess with a 7V drop with a few watts of heat from 12 to 5 you are wasting too much heat, which you could be using for red power LEDs in series just above the dropout.
I would strongly suggest you buy the OKI/MUrata 3 terminal SMPS if you only need 1A for 5V.
Make a professional drawing package and BOM at Digikey and they will ship all parts in 1 day from your BOM and save yourself some money from RadShack, except for maybe 5~10 in shipping. Buy enough to make a dozen kits and get your friends to pay for yours. You got a plane worth a few pesos., its worth it to get better parts.
THis MOSFET is good for 3 mohm (90A) for <$4
https://www.digikey.com/product-detail/en/IRFP3206PBF/IRFP3206PBF-ND/1894149.. Diodes Inc (nee Zetex) makes better ones for a couple dollars more.
For SMPS, don't design, buy these MUrata/OKI 3 terminal regulators 5V@8W $4
https://www.digikey.com/product-detail/en/OKI-78SR-5/1.5-W36H-C/811-2692-ND/3438675 you can connect them with 3 pin header cable from Digiikey too and hot glue any place or a tiny dot of polyurethane adhesive.
For root cause, the LDO's will fry from overvoltage kickback spikes or induced transients. They have very high impedance above 5V since they only source and not sink current. THus lack reverse diode protection on LDO with <0.1us inductive spikes might have caused it. The LED's can handle -5V each, but the diode with the least reverse capacitance will shunt the most reverse voltage, so the best protection is ESD protected LEDs but adequate (for some) is one reverse diode to protect LEDs in future. 10uA is tolerable at -5V whereas 50uA at -10V ( or +22V kickback will blow one of them if unusually low capacitance , so you were lucky. THis would be a double mode failure, not your root cause.
The workhorse 7805 (not 7505) LDO has OCP and OTP but not OVP. Somehow a microsecond or longer spike above 12V got into the 5V out, maybe thru your MCU loads elsewhere. So following the design guide and using a reverse protection diode or better a TVS clamp diode for OVP (eg 5.5 or 6V) would have saved both LDO and MCU.
If you ever need 5mm LED's I get them in bulk ( several kg) The White are 20,000 mcd 5000K 30 deg, also 14,000 mcd in both yellow and amber and some red. (500/bag min.) They are really easy to hook up with 30 AWG magnet wire, a few turns and solder right thru the varnish. in <4 seconds (never 10)
For aircraft EMI protection you should try to use CM ferrite beads sized for the wire in bulk to reduce interference with radio. any current pulses can be picked up on AM or SW between radio stations, if you aren't sure or don,t have a scope. It's also possible your transmitter or servo can be injecting many volts into the parallel wiring.
BTW nice plane. A buddy of mine could sell his vintage Cesna fully restored for $17K so he donated it to a women's flying club. I suspect you got about the same investment or more in yours.
BTW a small zenon flash bulb is not that hard to make and has as much efficacy as an LED, but also much more shielding, filtering protection needed and HV supply is the issue for efficiency.
I've seen xenon flash bulbs wipe out cell phone reception inside a building at 1 pps. (Drives the phone's AGC crazy when the current resonates during avalanche discharge)