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When Envy caught sight of Hughes’ photo that fell from his pocket whilst in the phone booth before his murder, he was originally going to change himself into Elysia instead of Gracia. He then realized if he took the form of a small child, he might shoot the Lieutenant Colonel in a non-fatal place due to how short he would become and result in Hughes surviving the attack.
Unlike Greed, Envy didn’t want material goods or worldy treasures to make himself happy. Instead, he sought to make it impossible for others to have them and to make poeple miserable, so that he might not be jealous of them anymore.
The reason Greed never recognized the new humunculus, is because he killed the previous ones out of anger when father ordered them to kill his friends because he was getting too attached. He then left the seven deadly sins because he no longer trusted them for taking his “possessions”