Author's Response:
You need to do Trace bitmap. You do that by selecting the sprite sheet, going to Modidy, Trace Bitmap, set everything to: 1, 1, pixels, few corners, and click ok, now select the white of your sheet and press delete.
I wont add a back button, im working on a 4th Flashforbeginners tutorial that also covers sprites plus a lot more, so people can then just check that one out.