Ok. The first thing I would suggest would be to make sure that you don't but it inside brush geometry, like muzzelflash said. Leave it out for now then when we get the sprite to show up later inside brush geometry, we'll work on making it show while its not in brush geometry first.
Your sprite properties seem fine, so I'm going to suggest that this is a custom sprite and maybe it hasn't been made properly. Upload your map with that sprite into the twhl map vault and I'll take a look at it.
This may be helpful for your sky question
http://collective.valve-erc.com/index.php?doc=1037472496-69804100