I am currently having a love/hate relationship with my 96 850 turbo wagon w/auto. One of the best all around cars I've ever owned. Much better than my previous 190E. Recently, after a long trip to Canada I discover there's moisture in the crankcase during a routine oil change. Then a week later, the engine check light came on. the brakes seems to make a buzzing noise coming from the front end that comes and goes w/o warning. My mechanic who specializes in European cars said the light came on because something is wrong with the EGR. He turned it off and the next day, it reappears. This time, the code indicated that it has a vacuum leak. He stumbled around and discovered that a wired that leads to the canister was eaten away by battery corrosion. So the code went away. Four days later it reappears and I would bet it is something else this time.

The car only has 60k and other than gas mileage getting worse(from avg. 24 to 18 mpg), nothing appears to be any different. I've been driving with the check light on since and I feel like giving this swede a boot. I love this car and wants to give it another chance. Is there hope? Any advice is appreciated.

On older 850s, even though the code indicates a vacuum leak (EGR flow) it's usually caused by crusty oil deposits clogging the EGR port in the intake manifold. That assumes that there are no vacuum leaks to the EGR controller and/or valve including the vacuum T under the throttle base cover.
To clean out those oil deposits, you need to remove the throttle base and EGR valve. Once there, you'll see the hole the the intake manifold that's probably clogged solid. You then need to use tools (drillbit, etc) to clean out that hole. It's also a good idea to be sure the flame trap and its related vacuum lines are clean as that's usually the cause of excess oil being there.
The other problems are probably not related to the EGR but some moisture in the crankcase and poor mileage could both possibly indicate t-stat problems (engine running cooler than normal).

Maybe my error, but there isn't a flame trap on turbo's is there?

MPG could be the front O2 Sensor....is your thermostat at the 3 o'clock position when warm...if not change the stat....

EGR temp sensor probably the problem...clean the throttle body while your down there...

Vaccum hose on the back of the intake manifold....is always a problem

Cap and rotor...could never hurt