First of all, check this thread:
tm.asp?m=2216887
In my first post there I attached files that (I hope) will help you a little (also check appearance.csv, there are descriptions for every line of first "composition").
Now your questions:
1- Is the sprite folder safe to mod?
The best thing to do is make your own skin (copy one of units skin directories already provided with game and rename it, it should be "[UnitsSkin]<any name you want>"). From this moment game will recognize it as another skin (you don't even have to restart the game, just leave options menu and go there one more time). You can edit png files anyway you want, but in appearance.csv you should only edit values (do not remove/add any line).
If you will do anything wrong, game will probably crash (then check ConsoleOut.txt in ToWs root directory, there might be some info why it crashed).
If game is crashing every time you select a scenario and click OK, then edit 12th line in data\GlobalSettings.csv file (you should know how

).
2- I angeled some spites to give the feel of counters thrown on the map, any probles with that,I don't see any actual borders in the png set-up.Is there anyway to tell how far a sprite can be adjusted?
There are borders in files I provided in other thread (mentioned at the beginning of this post). Each "field" size in units.png if 128x100px BUT it can be resized/stretched by game to any size (by using appearance.csv).
3- In the top right of the image there are multiple Items; I'm not sure what to do with them I believe I should leave them alone I'm not sure!
Those are icons that indicates all sorts of units state (more info in appearance.csv i provided in other thread). If you still don't understand, feel free to ask

You can edit them anyway you want, both source rectangle (from info.png) and destination rectangle (in game) are defined in appearance.csv.
4-Images on the counters make the national flag redundant,but I think I still need this because of the minor countries, right?
Yes, but of course you can define flags position and size in appearance.csv.
Also check this post:
fb.asp?m=2173282