a few sugestions
I voted fiveand will submit it to the gadgets section but here are a few sugestions:
1. You should add a fill option and posibly make a paint option (you can colour in squares by draging).
2. Animation i think you could make it so you can animate with it like have 20 frames probably a stupid idea but it might work.
3. Make it selectable so you can actualy use your sprites.
Brilliant flash, brilliant idea and keep up the good work!