If it gets lines over it like that, most likely there wasn't enough space to put it in, or you've placed something else over it. Since you said fsf gave you the offset, most likely the latter. This problem happened to me when I had the palette accidentally overwriting the sprite.
Start afresh with a new rom and try this:
Make sure you don't repoint the palette in unlz, just leave its offset as is
Make sure you use offsets beyond 800000 (there should be a tick box for this in fsf
Dont insert something else in the sprite offset