Elves absolutely *can* sleep. It's more a matter of personal and cultural preference as well as their capability to enter the trance. IIRC it's stated in the novels that drow specifically tend to have difficulty entering a trance and that most sleep instead. There are exceptions though. Quenthel Baenre, the current head of the first house of Menzoberranzan didn't even own a bed, and had a mat she meditated on instead IIRC.
A lot of Drow just lack the sort of mental stillness to enter the sort of meditative state required to trance due to....cultural reasons.
Even surface elves can/will sleep. IIRC they can become too exhausted to trance and have to sleep instead.
Not necessarily the sort of thing that tends to be reflected in the rules though.
