The origin of the story dates back to an Adventures of Superman Annual I'm told was meant to be published in 1988. Unfortunately, the story was shelved due to the editorial decision to shy away from annuals (which is why there is a gap in annuals between 1987 and 1990). By the time annuals came back, they were parts of crossover events (Armageddon 2001), so the 1988 story remained shelved.
The 1988 story would later be published as a throw away special released to store shelves the week before Superman died in 1992's Superman #75. This special story is that of the modern Sand Superman, and it was seemed designed to be the escape hatch in case the Clark / Lois relationship (engagement / secret ID reveal / etc) didn't work out.
The modern Sand Superman story is much like the old 70's story; an explosion of synthetic kryptonite causes irradiated sand to mimic and absorb all of Superman's powers; and Superman also found that this new creature was absorbing some level of his intelligence. At the 1988 story's climax, a powerless Superman fights the Sand Superman in the Fortress of Solitude. Superman realizes that the only way to beat the Sand Superman is to stop fighting and give the sand creature everything he's got; so Superman grabs the sand creature causing a massive explosion. We do not see the aftermath. The story ends with a rather ambiguous Superman / Luthor conversation in which Superman alludes to the fact that he won the battle by becoming the sand creature. The story is set before Clark and Lois began dating.
If you go back and look at stories between 1988 and 1992, you find several story situations that kept pointing at the Sand Superman door.
There's a story where Superman is battling the demon Blaze; she brags about her magic axe being Superman's doom due to his weakness to magic. Blaze strikes Superman with the magic axe only to watch it inexplicably break on Superman's chest. The only explanation we get is Superman saying, "Guess it wasn't as magic as you thought."
There's the "Time and Time Again" storyline in which a massive explosion causes Superman to absorb temporal energy; and explosions allow him to access the energy and time travel (just like an explosion was part of the catalyst for the power drain that created sand creature). Superman's costume also gets darker due to the effect of absorbing the temporal energy just as the sand creature's colors became darker as it absorbed more power.
Another story features Superman infected with some ancient virus that's killing him. As Superman gets near death, he takes on a sand like appearance; and he is cured by exposure to kryptonite that doctors brought in to weaken Superman's skin for surgery. The doctors are baffled at why the kryptonite saved Superman, and it is never explained. In fact, it is only the stories after the sand creature's place in continuity where we see that kryptonite no longer seems to rob Superman of any power at all; it simply causes him pain (likely because he psychologically believes it should cause him pain).
Then there is the Death of Superman story itself. I watched a QVC special at the time where Walt and Louise Simonson were helping sell autographed sets of the series. During the special, Walt opened the issue of Man of Steel that introduced John Henry Irons; Walt pointed out the page that seemed to show kind of transfer between Superman and John Henry Irons; Walt emphatically noted that this was important. Did I mention that Superman had been in a massive explosion just before grabbing John Henry? Later in the same issue, we see Irons rip the roof off of a moving car with his bare hands (no armor).
As the Reign of the Supermen came to a close, we see the return of the Superman who fought Doomsday; but he's powerless. The sun isn't giving Superman back his strength, and that only makes real sense if the sun isn't the source of his strength. Superman teams up with the other heroes and confronts the Cyborg Superman; the Cyborg rips open a hose spewing pure kryptonite radiation, but the Eradicator steps in to block the flow before it hits Superman. Power is transferred between the Eradicator and Superman; Superman suddenly gets his powers back. Green Lantern notes just a few pages later that there are massive levels of kryptonite radiation in the room; Superman is seen flying around in the green clouds with a smile on his face.
In the issues that followed, a robot at the Fortress of Solitude keeps trying to tell Superman that recent destruction at the fortress has uncovered something important he needs to see. Superman is too busy to pay it much mind. The storyline leads to November of 1994 with "Dead Again"; Superman finds a dead Superman body.
I believe this is where DC planned to reveal the truth, but they pulled back (instead making the story part of some nonsense Brainiac plot). Why would DC pull back?
Do you know what was happening at Marvel at this time? In October of 1994, Marvel had rushed together a story we know as the Spider-Clone saga; a story in which we discover the real Peter Parker had been replaced by a clone years ago. There was nothing to back this idea up; there was no years of planning in place; this Spider-man clone thing just appeared out of thin air. But it was a good way to beat DC's Superman story to the punch. I believe the Superman story was shelved because of the Spider-clone saga, but the story was not dead. DC appeared to be biding its time.
The Final Night event comes and Superman loses all of his power when the sun goes out. The sun comes back, but Superman's powers do not. Again, the sun is not the source of his power. Superman goes on a quest to try to regain his power, and he finds himself facing an alien electrical being. Superman wins the battle after surviving a large explosion. Superman's powers come back for awhile. Then Superman starts inexplicably turning into an electrical being (just like the one he fought when he got his powers back).
Grant Morrison introduces us to the world of DC One Million. In his story, Superman leaves earth to wander the universe; during this time, Superman "absorbs" over a dozen new powers. Superman's appearance on returning to earth features a darker costume and glowing yellow eyes (much like the sand creature had at first).
During Infinite Crisis, Superman loses his powers in final confrontation with Superboy Prime. One year later, Superman's powers return. The powers only return after Lex Luthor collects all kryptonite on planet earth and stores it under Metropolis.
I believe wholeheartedly that the real Superman died in 1988 and his body was left in the frozen debris of the first Fortress of Solitude. Until the time Flashpoint changed things, the Superman we read each month was the sand creature who simply believed he was the real Superman.
Now…it never happened.