A sprite is a set of SWF tags defining an animated object which can then be used as a simple object. A sprite cannot contain another sprite. hHowever, you can use PlaceObject2 to place a sprite in another.
The following are the tags accepted in a Sprite:
The data array of tags should always be terminated by an End tag though this can be inferred some players may not support a non-terminated list.
In order to initialize a sprite once, you can use the DoInitAction. This tag comes along (after) a DefineSprite tag and not inside it.
Note that in newer animations (since version 5,) it is possible to load a movie using an external link. Adobe calls them movies, although, really, once loaded, they are sprites. Those sprites can include all sorts of tags since it is the same as a complete Flash animation. The same concept is also available via ActionScript, i.e. you can create a new movie which in fact is a Sprite.