I've been wondering for a while about this. Is it possible (if it is how do you do it) to use sprites as your characters in the game engine?? any input would be greatly appreciated

Yes. Use your sprite as a texture on a plane, make sure face of the plane faces it's -x (Negative X) axis, (a Blender peculiarity,) To make this easier, go to the edit buttons and click 'axis' with your object selected. Then go to the paint buttons, and set the face to 'halo' this will make it always face the camera, like a 2d sprite.