So everyone (myself included) hated one thing - the Fairies in this game (with the different colors, who is lying, when to pass, and all of that)... Was there ever an official hintbook for this game that explains that part - as to who is telling what as true/lie?

This is probably my most hated puzzle in the history of gaming! If only those damn sprites stayed static and you could see their name before clicking on them.

Oh well. Not an official hintbook as far as I know, but the Internet is a wonderful thing and good samaritans have provided resources for future players in need. Another user, Lafazar, in another thread took the time to write down what every sprite says, in case you want to solve it applying logic:
https://www.gog.com/forum/dragonsphere/solve_the_sprites_puzzle_by_yourself

Or you could do what I did in my desperation and check Universal Hint System. It's not official but provides a series of hints, gradually from vague indications to the solution, for each puzzle. If you keep clicking, it will eventually tell you who you need to speak with:
http://www.uhs-hints.com/uhsweb/hints/dsphere/159.php

Honestly if they just fluttered in a SMALL circle so they weren't bouncing up and down and changing colors - like just have all the colors represented - this would not have been such a horrible puzzle...

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Ask GoG to include all the original files! https://www.gog.com/wishlist/site/for_dos_games_if_theyre_scumvm_also_include_original_files