Why are you using such low values for the voltage feedback resistors?
As Adam said, the power dissipation in R2 will be significant.
P = V2 / R
= 262 / 820
= 0.82W
The wattage rating of the resistor doesn't affect how much power it is forced to dissipate. A 2W resistor in that position still has to dissipate 0.82W. The reason a 2W resistor will run cooler than a 1W or 0.5W resistor is just that it has more surface area from which to radiate the heat. So you can expect your 2W resistor to get pretty warm.
I don't know why the regulation is poor. Make sure your inductor isn't saturating. You need to look at the current waveform in the inductor. If you have a current probe, great. Otherwise, put a small resistor e.g. 0.1Ω in series with the inductor (preferably on the left side) and put your scope across that. You'll need your scope and/or the regulator power source to be isolated from ground, otherwise you'll short out the power source when you connect the scope.
The scope should show a nice linear ramp. If the ramp suddenly starts climbing sharply, the inductor core is saturating.