Any rumors about SF's are incorrect because there is not enough data to confirm anything. Heard people get it from first drop and people get it from wolf boss. The jury is still out as to whether the drop chance increases with a low level run as opposed to a high level run
Farming SF is a repetitive, and incredibly annoying task. Unless you have the patience of a monk and the determination of a something with a lot of spunk I wouldn't try it.
What most people do know a days is farm up money in game, and out so they can track down someone on any server who is selling a SF, transfer to their server and pay for it.
Mind you SFs nowadays go for a whole lot for the reason I first stated. In any case I wish you luck finding your SF, it took me a while myself but its well worth it.
The way to have only corpses with greens/blues/purples show is to have at LEAST 2 people in the instance;
Designate one toon to loot corpses, I typically run with my main and dual box my friends toon just to autofollow..
Anyways, the toon you want to see the loot on (I use my 80 so I don't have to alt tab), turn Pass On Loot to ON, but make sure there is 1 person in your party with Pass on Loot set to OFF otherwise the loot will just become free for all. Make sure the loot system is one that uses a Roll system (Group Loot works best)
Now you can also set LOOT THRESHOLD to Rare if you ONLY want to be able to roll on blues.. But seeing as SFK drops some nice 19 greens you probably will want to leave it to the default Uncommon.
When you loot a sparkle on your main you will have to switch to your other toon to roll on it, since you automatically pass on the roll with Pass On Loot turned on.