Hello Ccook67357, good luck on your game.
I came here in a similar quest, so I think we could share several things.
At first, I'm sorry to say that no one can fully decode the original sprites, I spent several hours trying to do it myself without being able to decode more than one picture (which was probably not inside the sprite files).
"The thing" here is: the developers
(read this thread) have answered Grunt's questions about deadlock and they don't have a decoder or the source code anymore.
1 - The sprites file uses a compression which they aren't very sure how to decode, but one of them gave us hints on how to do it;
2 - The sprites file has no signaling on when a sprite ends or starts. There was a offset table or a set of defines in c++ that was possibly compiled into immediate values (values that are compiled into constant instruction parameters) scattered all around the binary object code.
I have tried decoding, trying every possible combination of codes that would fit the developer's description (which is a bit ambiguous), but I couldn't find a visible indexed graphic inside the (several) decoded files. If I had a known decoded sprite it would be easier to run several codes and make them check if they find the known sprite within them. Also, I would also be able to search the memory allocated by the game while it's running and grab the sprites from there.
I have an alternate solution described
here.