Thanks for this post Bob, it is quite interesting. There is some more info about sparse files here: http://www.flexhex.com/docs/articles/sparse-files.phtml that confirms that the only way to 'unset' the sparse flag is to copy the file (creating it from scratch basically).
This raises my question: how is it possible that sparse bit becomes 'sticky'? When a snapshot is created, is a new sparse file created explicitly or there is some solution involving duplicating of file handles? Isn't it in the end a bug in the SQL Server?
And - why copying of data file doesn't work in SQL Server 2005?
Regards
Piotr