> Well, you could.. But you would have to a) add a heat sink,

There are light fittings specially designed for LEDs now, where the 
light fitting itself is the heat-sink. This seems like a good idea.

> b) use
> higher end LED which are way brighter than the ones usually found in
> those things,

Higher brightness = more heat. You can get ones that are marginally more 
efficient, but you're still generating roughly the same amount of heat, 


> and c) throw out the transformer setup on them, and go
> with a straight DC power connection, with the right voltage range.

Actually that is quite common here, if you've got multiple low-voltage 
lights then you have one transformer "brick" (that attaches above the 
ceiling somewhere) with DC running to each bulb. It's especially common 
in bathrooms as it means you can run standard lights (rather than 
expensive IP rated ones) much closer to a shower/bath than the 
regulations would allow with mains power.

> Since, short of wiring your house yourself to provide 5v and 12v lines,

I don't think it will work very well trying to wire an entire house with 
5V (or even 12V lines). The total current will be large, which means 
thicker cables required, and over longer runs you'll get significant 
voltage drop due to the cable resistance. Dropping a few volts when you 
switch on a 13A kettle at 220V is no issue, but dropping from 5V to 2V 
when you switch on a room full of LEDs is obviously an issue. There's 
room for some innovation here I think.

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