The voltage regulator is only used to generate the 3.3V supply for the ESP. But OP is using the 5V from the input of the regulator to power the LEDs.
At max it is wasting about 0.7W if the 400mA max current is right. But it will still get hot due to the current draw of the ESP. Even at half of the max. rated current this device is probably 30-40 degrees above your ambient temperature.
That is something I would disagree with. Especially when it comes to battery powered tools which seems to be everything nowadays.
If you go with one of the big brands you are almost guaranteed to get a spare part later. If you only use your drill once a year, the battery might be dead in a few years if you don’t take care of it. Of course your battery might cost the same as a no name drill, but that is still a fair point IMO.
Now that you have a drill maybe you need a saw later. If you went with a big brand they typically have a large range of devices that work with the same batteries. So you can reuse your battery from the drill and also don’t need another charger for that single device. This is also not limited to tools only. Maybe you need a light or a battery powered radio for something totally unrelated.