letter from igros to someone asking why chabad dosnt sleep in or decorate the sukkah (from chabad.org)
In order to safeguard and inspire a greater feeling of sanctity towards the Succah, sleeping in it is not practiced by us. The basis for this is twofold: FIRST, we have a rule that המצטער פטור מן הסוכה (suffering exempts one from dwelling in the Succah). Secondly, during sleep, a person is not in control of himself, and, furthermore, the very act of dressing and undressing, etc. inevitably creates a commonplace attitude toward the place which serves as a bedroom. Such a depreciation of attitude toward the Succah (by sleeping in it; as explained above) from what his attitude should properly be towards the Mitzvah of G‑d whereby he has sanctified all Jews, would be deeply felt by the Chabad Chassidim by virtue of his Chassidic teachings and upbringings, and would cause him profound spiritual suffering. The combination of these two considerations, therefore, led to the custom not to sleep in the Succah.
However, if a Jew feels absolutely certain that his sleeping in the Succah would not in the slightest affect his attitude toward the sanctity of the Succah, and is consequently free from any mental pain that might be caused thereby, he is duty-bound to sleep in it, in accordance with the fullest meaning of תשבו כעין תדורו, to make his Succah a dwelling place to the utmost. I hope the above will provide an adequate answer to your question, but should you desire further clarification, do not hesitate to write me.