We actually had full code to support this, but it seems that clients don't support it, likely because sprite smilies require a background image. In a quick Thunderbird test, I was actually getting the alt text to display which was ideal since it was the smilie replacement. However, Gmail actually displayed the clear image meaning nothing appeared to display (no background). (Thunderbird may have done that in other circumstances.)
As such, I've disabled parsing them in HTML email now.