From what I understand Sphagnum is already classed as a sterile medium (which is why they can ship "bare root" plants from abroad wrapped in sphagnum), so I do not think it is necessary to sterilize (I never have). I just throw some in a bowl of tap water. The only bugs I have ever had issues with in sphag are springtails, but they don't harm the plants and are barely even noticeable. The moss will expand somewhat, especially if it came vacuum packed (in a brick shape), so hydrate a little and if it isn't enough add a bit more. It takes less than a minute to hydrate!
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