You can use any size sprite in C2 however the more you reduce or enlarge a sprite the fuzzier it gets and you will drop pixels so it is best to stick with a size close to the size you want them to appear in the game.
Common sizes are all divisible by 8 so 8x8, 16x16, 32x32, etc.
I use 32x32 for my game size primarily because you can get ready made sprites already designed that size so they will look good when added to the game.