I'm not sure why you keep suggesting that, custom sprites have been using extra bit 2 for as long as we've had custom sprites. Extra bit 3 is just available as an "alternative" custom sprite.
Anyway, some questions to help debug:
1) Which sprite tool are you using?
2) Are you sure the sprite is actually being inserted? To check, you can enable debug output for Pixi by running it as "pixi -d romname.smc" through the commandline.
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