Scratch

Here's what I've learned in my limited attempts to use sprite sheets. You can't open the whole sprite sheet in scratch and then cut out the individual frames, cause they're usually way too big and you end up with compressed (and * looking) sprites, so how do you get the individual frames into scratch?
   
    So far what I've done is this: You open up the sprite sheet into paint(or photoshop, gimp, etc),  drag the selection tool around the particular animation you want to grab (running, swinging sword, jumping, whatever) and copy about four or five frames from it. Then I usually have another copy of paint open and paste the frames into that. Then I save the small group as a png to avoid fuzzy pixels, and upload each group into scratch this way. After I've got all the frames from the one animation I want to work with into scratch, I go into the scratch image editor and use the fill tool to make the background of the frames transparent (Use the white and gray checkered color from the bottom right of the color palette.) If the background color of your sprite sheet is obvious (i.e. a blue background under a red character) then make sure and use the fill tool on the little spots that were left inside the bondaries of the frames.
   
    Sometimes sprite sheet creators are lame and choose a color that's not easily picked out from the rest of the sprite, so then all you can do is use your best judgement. If your sprite sheet is a gif, and the creator saved it with a transparent background, opening it in paint will give it a gray background, and if you save it from photoshop, you have to know how to save it with transparency.  Anyways. . .
I digress.

    Once you have your animation frames uploaded into scratch in sets of four or five, and situated on a transparent background, then use the right click and "save screen region for new sprite" option to make new sprites out of all the frames. (They appear in the center of the screen and tend to get in the way, so just drag them off to the side for the time being.) After you've got all your frames separated into sprites, go to each you just created sprite under the costume tab, and drag the costume to the thumbnail of the base sprite, the sprite you actually want to animate.

    Now you should have one sprite with all the other sprites as costumes, and you can animate it however you want!