The entire framebuffer can be thought of as a huge sprite. Modern RAMDACs can scan multiple overlapping arbitrarily sized framebuffers (layers) simultaneously, while doing bilinear filtering, merging alpha, colorspace conversion, rotation, LUT, etc.

All that happens on the fly without intermediary frame buffer composition in between. The output goes directly to the display (over HDMI, eDP/displayport, DVI, etc.).

Yeah, and of course mouse cursor is a sprite in the traditional sense. Although on modern HW you could implement mouse cursor as a hardware layer.

Isnt the mouse pointer actually a hardware layer in most OSes nowadays?

Yeah, it is. Sprite originally meant a hardware layer, back from the ancient times. Nowadays it also sometimes means rasterized 2D objects.

C64, Amiga, MSX, NES, SNES, Sega Master System, etc. all supported hardware layer sprites back in the eighties.

What's the difference? Size? If a hardware layer could be configured to be 32x32 pixels and offset to any position, wouldn't it become a sprite?

If you're using a decent graphics driver, the mouse pointer is a sprite.