Yeah, all sprite functions work. It really is just a regular sprite now. There are only two things special about #GSPRITE:
1. How it gets initialized when you run ACLS or XSCREEN:
'SCRWxSCRH is the size of the screen
SPSET #GSPRITE,0,0,SCRW,SCRH
SPPAGE #GSPRITE,0
SPLAYER #GSPRITE,0
SPOFS #GSPRITE,0,0,4095
2. SPCLR without any arguments clears sprites 0-4094. You can still do SPCLR #GSPRITE, though.
Aside from these two things, it's a completely normal sprite, and you can use it as one if you want.
As for why they did this, it's because sprites could already do everything the graphics screen could in SB3, with one exception: being able to pick a GRP for each individual sprite. Now that we can do that in SB4, there's no reason to keep the graphics screen around, since it'd just be a worse sprite.
There were similar reasons to merge BGs and the text screen, since the text screen was basically just a worse BG. In that case, though, we did lose background colors, but I think it's a decent trade, since it's not tough to simulate.
In general, I think these changes have made the language a lot cleaner conceptually when it comes to graphics. At the same time, it may be harder to understand.