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I think that since Sauron was disembodied, much of his potency and ways of knowing and seeing things was very limited. Since he was hard pressed to roam middle earth freely, and his servants have never really proven him to be too bright, I doubt that he would have known for sure the true nature of the Istari.
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No. At the time of the War of the Ring, Sauron had a physical body - the stature of a man; much taller but not gigantic.