Should I replace ELV 12V transformers with LED drivers?
How to apply LED lights
You should probably read Lutron Application Note 559. It describes how to attach LEDs to that dimmer, and makes specific product recommendations.


They have two different groups of LED lights they recommend, depending on if you want to dim down to 20% or want even lower light.
How to install the ELV “transformer”
Firsts, you must use a device that is approved (NEC 110.2), and that means UL-Listed (not RU-Recognized), or another equivalent “NRTL” such as ETL or CSA will suffice.  No CE, no cheap Cheese junk off Amazon.
Second, you must follow the installation instructions that come with it, since those are part of the UL listing etc.  They will tell you where you can and can’t fit it.  As long as you install it per the approved instructions, you’re golden.
LED drivers are probably not what you want, at least I don’t think they are what you think they are.  But as you see with “transformers”, it’s very common for people in LED marketing to toss around the wrong words for things.  I would build out at least one pendant light with exactly the products which Lutron recommends in Note 559, so if problems come up, you can narrow it down between the dimmer, “transformer” or LED.