I suddenly lost two exhaust valves (burned) on my 96 850T at 53K miles--97k now. Cost $1,500 to repair. Fortunately, got Volvo to pay half of cost since it was just out of warranty. The dealer had no idea why the valves burned, but suspect Bosh platinum plugs, which I have never used since. Anyway, this is an actual cost reference for you...

You can always get a second opinion but in this instance it does not sound like it will come out much different than the first. The CEL only blinks when you have a misfire that is bad enough to cause catalytic converter damage. So, you have a dead hole for sure. The only question that remains is whether or not it really has 0 compression. If that is the case then you can count on it costing you in the ballpark of 2-4K to fix it depending upon the nature of the failure. It may be cheaper to either cut your loses and get rid of the vehicle or put the best used motor in it that you can find. You really need to make up your mind about the used motor before you have someone tear into it and tell you what exactly is wrong with it. That kind of diagnosis alone will set you back several hundred dollars or more. That is all money that would be better spent on a good used motor. If you continue to drive it with a dead hole you might as well count on putting a cat into it as well because that amount of raw fuel and O2 will put the whammy on your cat for sure.

If he is correct and the compression is in fact zero on that cylinder you have a burned valve or a burned piston.The C.E.L. is due to a mis-fire code and yes its going to cost a lot to fix it if thats the case.