You can boot SM from an .ELF, but you won't gain the benefits of being able to swap, as that function relies on the physical SM disc (CD or DVD type) in order to fool the mechacon into reading most single-layer games. Without that (or possibly an original game disc with a large TOC), the mechacon simply will not allow code to read from CDVD.
Instead of using ESR, you could try OPL, which can load games from USB drives (slowest, USB 1.1 speed only), SMB/CIFS Windows-compatible fileshare (medium speed), or internal HDD <1TB (fastest, only works with fat PS2s). There is also PS2ESDL which can load from USB or from Firewire (on compatible fat PS2s), and which is completely independent from OPL's codebase so for USB usage, both are handy in case of compatibility issues.
Of course, if you are handy with hardware, you could also purchase a modchip which would be able to read backup discs with no patching required. Each method has its benefits and downfalls, and only you can review and decide which would be best for you.
Chip-free/MC-free homebrew <3
FMCB 1.93 on MC for emergencies, NA
250GB HDD/FHDB 1.93/OPL 0.9.2 (GSM and non-GSM)/PS2 games, NO HDDOSD
80GB HDD/FHDB 1.93/POPStarter rev12/OPL644/GSM0.37/PS1 games, NO HDDOSD
SCPH-75001 (sitting idle, slims suck):
FMCB 1.92 on MC