How can I make a sprite move when key is held down

The keyboard events (see pygame.event module) occur only once when the state of a key changes. The KEYDOWN event occurs once every time a key is pressed. KEYUP occurs once every time a key is released. Use the keyboard events for a single action or a step-by-step movement.

If you want to achieve a continuously movement, you have to use pygame.key.get_pressed(). pygame.key.get_pressed() returns a list with the state of each key. If a key is held down, the state for the key is True, otherwise False. Use pygame.key.get_pressed() to evaluate the current state of a button and get continuous movement:

while running:
    for event in pygame.event.get():
         if event.type == pygame.QUIT:
             running = False

    keys = pygame.key.get_pressed()
    if keys[pygame.K_LEFT]:
        x1 -= 1
    if keys[pygame.K_RIGHT]:
        x1 += 1
    if keys[pygame.K_UP]:
        y1 -= 1
    if keys[pygame.K_DOWN]:
        y1 += 1

    setup_background()
    spriteimg = plumberright
    screen.blit(spriteimg, (x1, y1))

    pygame.display.flip()
    clock.tick(100)

---

See also Key and Keyboard event

Minimal example: repl.it/@Rabbid76/PyGame-ContinuousMovement

import pygame

pygame.init()
window = pygame.display.set_mode((300, 300))
clock = pygame.time.Clock()

rect = pygame.Rect(0, 0, 20, 20)
rect.center = window.get_rect().center
vel = 5

run = True
while run:
    clock.tick(60)
    for event in pygame.event.get():
        if event.type == pygame.QUIT:
            run = False
        if event.type == pygame.KEYDOWN:
            print(pygame.key.name(event.key))

    keys = pygame.key.get_pressed()
    
    rect.x += (keys[pygame.K_RIGHT] - keys[pygame.K_LEFT]) * vel
    rect.y += (keys[pygame.K_DOWN] - keys[pygame.K_UP]) * vel
        
    rect.centerx = rect.centerx % window.get_width()
    rect.centery = rect.centery % window.get_height()

    window.fill(0)
    pygame.draw.rect(window, (255, 0, 0), rect)
    pygame.display.flip()

pygame.quit()
exit()

You can use pygame.key.get_pressed to do that.

example:

while running:
    keys = pygame.key.get_pressed()  #checking pressed keys
    if keys[pygame.K_UP]:
        y1 -= 1
    if keys[pygame.K_DOWN]:
        y1 += 1