The dangers of Ringmaking

[Hookbill the Goomba]

I was kind of confused by a few things when re-reading "The shadow of the past" in LortR and "Of the third age" in Silm. Did Sauron see the danger in making the ring? It was quite foolish of him to allow such a thing to hold so much of his power.
Did he know that if it were destroyed that he would be left as a wandering sprit with no power or ability to take shape?
Gandalf says that the thought would not enter into his wildest thoughts that they would seek to destroy the thing. Sauron, being a Miar spirit, will have known of Olorin being famously the wisest of the miar, If sauron knew that he had come to Middle earth he would know that he would have wisdom enough to counsel others to destroy the ring.
He surly would have known about him, if not after rescuing Thrain from his dungeons in his time as the necromancer, but surly after the white council threw him out of Mirkwood.

When Sauron was concocting this plan for world domination did he not think it was a bit silly to create something with so much of his power inside of it. It seems that the ring becomes of less importance to him as he grows in strength, in "The shadow of the past" Gandalf says that all of sauron's thought is "bent" on the ring. However, Sauron seems more interested in the war towards the end of the Return of the King. I think this is most apparent in the way that he orders the ring wrathes to stop searching for it and lead out the troops instead.

I guess what my question in simple terms is "What was Sauron thinking? What thought poses lead up to him saying 'Yes, I'll make a ring that, if destroyed, will render me completely defeated.' and why did he make it if these dangers were around? Surly he was not that blinded by Melko!"

My apologies if this has already been discussed elsewhere, I ask it because I can't find any answers anywhere, as I was asked this by a sibling and could give no answer.