Did you read the readme that came with Sprite Tool? It clearly says that to insert the new sprites you added, you press "Insert" (on your keyboard) and then (in the box that comes up) put in the sprite number (from the sprites.txt list) and then put either 2 or 3 in the lower right hand field depending on whether or not that sprite has an extra bit that can be set (open the sprite's ASM file for additional info on whether or not it has an extra bit).
Once you do this, the sprite from SMW with the corresponding number as your custom sprite will appear on screen 0. Drag and drop this where you want it to be. Custom sprites never appear in LM as they will in the real game.
Before your sprite will look correct in game, you need to insert the accompanying ExGFX file in the appropriate slot (SP1-4).
Save your level and then test.
Also, I'm not sure, but I am guessing that you didn't make a sprite list. Just take sprites.txt and start adding the the "random_sprite.cfg" (example name) files that you want to insert in your game. Make sure that you number them appropriately (see readme again for appropriate number ranges).
Lastly - it would be great to have a base block/sprite IPS patch, but there are more custom sprites/custom blocks than there is space in SMW to include them. You can add a lot, but not all of them. Also, inserting ALL custom blocks would eat up a huge amount of Map16 space. So, each person has to pick and choose what to include.
[?] Miscellaneous Helpful Hints
If I moderated your hack, there was apparently a 90 percent chance it was rejected.