um, what the hell? you have a 2d guy as your main character(in 3d world)? try getting hold of a 3d guy.
other than that, it's going to look wierd, anyway
make a plain, texture it with your character image(avi)
and Avi the thing so that the object looks like it's got animation
don't know, it's pretty hard and confusing, never really did that kinda thing
if your going to use a 2d character for a 3d world, either "cell shade" or make a 2d world with the 2d guy, or 3d world with 3d chara
sprites are used for menus, frames and stuff like that in 3d games(or at least I think so)
anyway, what type of game you making...