Hello:

I agree with Klaus that unless you have noisy bearings, the voltage regulator/brush pack is the way to go. Rebuilt alternators at the parts stores are often very poorly done.

The voltage regulator/brush pack can be replaced in the car (it is not a particularly fun job, mostly because of one lousy Phillips screw that holds on the black plastic cover, but it beats pulling the serpentine, moving the power steering reservoir and pump and then disconnecting and unbolting the alternator!).

Here is my post on the topic:

http://www.matthewsvolvosite.com/forums/viewtopic.php?f=1&t=62367

Scroll through, there are part numbers, tool suggestions, etc.

The other thing you need to check is whether you have voltage drops in the cables. This is a very common failure mode for these cars caused by corrosion in the cables. Measure the voltage drops on the positive, negative and B+ cables.

Have the battery load tested at a parts store. Resting voltage doesn't give you the complete picture.

Let us know what you find!