If it is actually a LM2703, considering its normal marking is 'S48B', it is unlikely to be wired in that configuration. You must understand that SMD markings are not unique, the same device from a different manufacturer might have a different number and the number could be shared with completely different devices.
If you look at the Texas Instruments data sheet for the LM2703, Fig. 17 it will show how it would be wired for driving LEDs. The schematic you show is for constant voltage output but LEDs need a constant current source. I will try to explain:
Like most diodes, LEDs need a small voltage across them to start them conducting, in the case of an LED, it is the point where light first starts to be visible and can be anywhere from about 1V up to 4V for a single device. When it reaches conduction point and LED will try to hold the voltage constant. In a linear device like a resistor, if you pass more current through it, the voltage across it increases proportionally, however in an LED, the voltage is pegged down and any attempt to pass more current only results in it more power being dissipated in it. To some degree this results in more light being emitted but beyond its capability to be brighter, it just produces more heat.
Example - connecting an LED directly across a 12V battery will make it try to pull the battery voltage down to say 2V and so much current flows the LED burns out.
The way we ensure the LED operates efficiently and within its ratings is to use a constant current source to power it. Constant current means just that, we decide how much the current should be (typically around 10mA for small LEDS) and the regulator circuit adjusts the voltage to maintain that current. If the current goes too high, the voltage is reduced, if too low, the voltage is increased. Doing it this way means the voltage across the LED, or maybe several LEDs in series, isn't critical, it adjusts to their demand which makes it ideal to cater for different batches or even types of LED during production.
If you look at Fig.17 in the data sheet you will see the LM2703 output voltage is produced across 'Cout' and applied to the top of the LEDs, this is the voltage that will be adjusted to keep the LED current constant. It senses the current by monitoring the voltage dropped across R2. As this is a resistor, the voltage will be proportional to the current flowing through it, and therefore flowing through the LEDs. By maintaining a constant voltage across R2, it ensures a constant current flows through the LEDs. Even if one or more LEDs were shorted out, the current in the remaining ones would stay the same because the supply voltage would be dropped.
What makes it difficult for us to help you is we don't know what any of the values are and how the LEDs are connected. This is where a schematic really helps but we appreciate they can be almost impossible to get hold of. Your problem seems to be that the LM2703 is producing too much voltage and hence too much LED current, making the IC and LEDS run too hot. The implication is it thinks the LED current is too low so it is trying to compensate by producing more output when it shouldn't be. That suggests the 'FB' pin isn't seeing sufficient voltage being dropped across R2. It could be the resistor itself but it is unusual for them to drop in value significantly, it could be a short across the resistor so no voltage is dropped across it or it could be the 'FB' input in the IC is faulty.
Brian.