We did solve the problem. Part of the lock mechanism is small electronic unit that probably contains some computer components. Sassy car's computer probably didn't recognize the unit from the other vehicle. We removed the unit from the "new" lock mechanism and installed the old one, this did require some wire splicing as one was two wire and the other three.
It works just fine now!

Just a thought... The 1996/7 sedans were wired with a dash mounted lock/unlock switch, not available in 1995. It may be possible that there is a relay difference between the years???
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Keeping it running is better than buying new

The first thing I would have looked at is the pin/rod behind the outside door handle. If that comes loose or bends, the key won't lock the door.

You need to check the wiring on your 'new' lock mechanism. It isn't communicating with the security system. It might also be the micro switch on the latch portion of the lock mechanism, that small black metal piece that can be flipped up 2 positions at the door jam.
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Keeping it running is better than buying new

The first thing that you need is the wiring diagram, search for this:
Volvo wiring diagram TP 3907202 (205 page PDF file)

Then you need an ohmmeter and check the wiring of the drivers door lock
to the car. It's possible a wire may have broken in the door harness.

You will find the locking circuit on page 115
Page 116 has drawings and the locations of everything
Page 200-205 has the component descriptions so you can understand the schematic
ie:
3/74 = L front lock
2/7 = Central lock relay....
31/7 is the ground for the drivers door lock

Start with the ground wire from the drivers door lock pin 14 a black wire, to the ground connection 31/7 (hint: find the location for 31/7 on pg 116)

I see that there's a door connector 24/5 That might make troubleshooting the door wiring easy if it comes out easily ?

Someone may chime in on that ?

Good luck, Bill