Having tbe embedded wallet must feel like quite the milestone.

Thanks! It does feel that way. There were many miles of stones to get here, but this was a major one after figuring out how to implement the not custodial machinery.

has anyone tried to swap Spark back to on-chain BTC?

We haven't. Others have. It's doable but it's impractical in many cases, especially ours, and is not implemented in a production wallet yet afaik.

How does that work exactly?

It's a bit like lightning in that a Spark wallet is just a bunch of pre-signed onchain transactions that haven't been broadcast yet. To unilaterally exit, roughly, you take those presigned txs and broadcast them.

Their docs are pretty good if technical.