Folder Sync is for when you’ve got edits that need to be made in another program. It isn’t designed to work between two Scrivener copies at all—it isn’t that complicated actually. It’s just a series of files with an identifier in the name so that the program knows where to put the content if it has changed. Therein lies the problem, since identifiers can drift between projects and end up meaning different things. So that answers that. If they use Word, then give them RTF files and you should find that workflow works pretty smoothly. You’ll even be able to see their comments and vice versa (though do let them know they shouldn’t use change tracking).
If you both use Scrivener, that would be optimum. In that scenario you could put the .scriv project in a shared location, like a Dropbox folder, and take turns editing out of it. See §13.6 in the user manual for important tips on how to do this safely (and make sure your editor reads them too).
Look around on the forums a bit, as I’m sure you can imagine, this is a topic that has been discussed quite a bit in the past.