In this paper we present the results of a FUSE monitoring campaign of the SMC WO4+O4 V Wolf-Rayet binary Sanduleak 1. Our 18 spectra obtained during a little more than one orbital cycle in 2000 October combined with four archival spectra show variability in the S VI, C III, C IV, and O VI P Cygni profiles, which we attribute to emission from the shock cone resulting from the collision between the two strong winds and to atmospheric eclipses of the O star continuum light by the W-R wind. All the lines vary in concert indicating that the cooling is such that even lines such as the OVI λλ1032, 1038 doublet form in the linear part of the cone. We have also applied both a simple geometrical model and profile fits, including emission from the normal wind, extra emission from the shock cone, and the atmospheric eclipse. Adopting an orbital inclination of ~40°, we deduce a total cone opening angle of ~80° and a streaming velocity for the gas along the shock cone of ~3000 km s-1. The luminosity ratio required to fit our spectra is LO/LW-R = 3.5, and the stellar radii are 3.5 and 12 R☉, respectively, for the W-R and O stars. We also present radiative driving models for this binary system having two massive stars with strong winds and discuss radiative inhibition and braking effects. In particular, we address the coupling of the O star radiation with the W-R star wind. Finally, we present a PICA hydrodynamic colliding-wind model for Sand 1. We find an opening angle for the shock cone similar to that deduced from the line-profile fitting, but significantly longer cooling lengths along the shock cone. However, the model reveals some cold gas that is stripped off the O4 surface and mixed with the hotter WO4 material, thereby accelerating its cooling. This could very well explain why shorter cooling lengths are inferred from the profile fits.