For Sam, searching for the cure was always something that Dean was determined to do. He went along with it, believing for a while that it was for the best. That way, he wouldn’t have to be afraid of the humans, and he’d be normal again.

After some time, he realizes that he’s actually happy the way he is. He doesn’t want Dean pushing himself to find a cure that doesn’t exist (all they have to go on is Celeste’s words about it, which promise the curse is unbreakable), so Sam tells him to stop.

If you want to see the argument between them, check out the part found in Adventures at Bobby’s.

But that’s okay. I’ve got you, after all, and that’s all that matters.

Nope, Sam does not become a sprite. And technically, Sam doesn’t ‘turn into’ anything in the story. He is merely cursed to shrink. Any other effects that hit him, such as his knack, are all side-effects of the spell, and if he ever complains that he’s not human, that’s just his own fears coming to light – see here.