There are a ot of rumours I hope to clarify the facts:

NIE is NOT proof of residencia. it is soley so you can buy property, cars, open bank accounts etc.

A Residencia card is proof of residencie. (If you have a NIE number the police can check whether you have residencia immediately so do''nt try to deny it - you will be found out because it the police who issue residencia cards)

The police CAN insist you change your driving licence for a Spanish one if you have been on Spanish soil for two years. Her'es the EU Directive which gives them the authority to do so - see paragraph 6.

http://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1430377687650&uri=CELEX:32006L0126

John.