Is it possible you disturbed a wiring harness or connector while doing the other work? 3 experiences I've had might be informative:

on one car the dealer had replaced the trans before I bought the car used. They nicked a wiring harness under the hood and damaged the engine temp sensor with the result that the dashboard temp gauge worked erratically. Easy to fix once I found it (not a Volvo).

poorly seated large under-dash red connector after replacing evaporator. The trans sometimes did what yours does (this is my 850).

stuff spilled in center console on a 240. The auto trans gear position sensor is there on that car and the starter sometimes wouldn't engage (as if not in park or neutral). On the 850 does your mode switch and all window and mirror switches work? Also possibly a bad ground to the console especially if any work was done there in the past.

Stumper!!

When the PNP fails, you usually get a flashing arrow and the reverse lights no longer work.

It might be worth dropping $100 at your local friendly dealer and have them look for any codes. At least they can point you in the right direction. Their diagnostic code reader is much better than the generic.

BTW, the W switch will put your car in 3rd gear which is OK when you are already rolling.

Is it only 1st gear that acts this way?

Klaus
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Please answer, we need to know if the advice is good or bad. The 164 has a new home, all I am left with are 2 turbos :)

I have a '95 850, and it had erratic shifting problems. Primarily dropping in and out of overdrive, but it did get progressively worse. I replaced the vehicle speed sensor and it fixed the problem. The tranny just did not know what speed the car was traveling at, so it just kept hunting around for a gear.

Yakdad49
'95 850 na