Yes, this "Spooky Sprites" program is indeed what produces the TRS files and it is something that JK has programmed over a dozen years ago on an Atari Falcon ST when he was still in college. When I tried to find out how to do sprite dumps, I tried to get every version that has been released of said program; and I did manage to still find archives that contained version 2, 4, 5 and 6 of the Atari Falcon program on old BBS and Usenet archives, together with nice documentation about the file format. I went as far as getting the programs to run on an emulator, but they were of no use as they crashed on everything from the games that I tried to load, with the exception of the original CoE game files, maybe.
Although many of the original Atari Falcon ST hardware restrictions are still in use in the current sprite format(!) which leads to funny code you have to create in order to make those sprites usable, JK has ported the program to Linux, which is what KO is using now, commenting that it'd be the "least user-friendly graphics program one can possibly imagine"
and of course the file format has since had a few additions to it as well. Which is why I couldn't get a "perfect" sprite extraction (Ulm's national flag still looks strange when I extract it), but something which works well enough to be of some use. The code that I came up with was a little messy and didn't receive any cleanup when I sent it to llamabeast, I'll pass it to you via mail as well now if you want to play with it.
Here's a screenshot that KO supplied from the Linux version:
And here are a few very old threads that were concerned with the original software, which might interest you to read them:
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Updated graphics?
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I can't extract the sprites from the .exe
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Question about Dom 3 development 
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Re: Modifying the TRS files possible?
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