Gnomes don't move like sims do, they change position at most once a day. First you have to take the gnome out of inventory and place it on the ground. Sometime during the night it may poof and show up somewhere else on your property, often in a different pose. From your perspective, when the sun comes up, some or all the gnomes will be in different places, doing different things.
The vampire gnome will turn teddy bears into vampire gnomes. There is no "turning". The bear goes poof and a new vampire gnome appears. I think Saltypaws posted a video of the change (sorry if I said the wrong member name). A bear is worth $50 but a gnome is worth $1000, so it's not a bad deal.