The term "sprite" is mostly used in games. A single image file that contains multiple sub-images is called a "sprite sheet". (This reduces overhead compared to loading a large number of image files.) In this case they happen to be video thumbnails.

I'll admit I was expecting an explanation of how to extract sprites from retro video game footage using FFmpeg, which I can see totally being possible with a bit of work.

I was thinking the opposite: Using FFmpeg as a sprite engine, to move sprites around, over background layers

Overlaying them at fixed positions is trivially easy, but animating the movement may take some work.

Maybe thumbnail sprite sheet is a more accurate term? I would have thought thumbnail on it's own doesn't represent the fact we're stitching together all the thumbnails of the video into a single image.