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Sounds like a worn gearbox to me, too. FWIW both of my SAABS often would not shift into 1st unless the car was stationary when they were BRAND NEW! Legendary weak SAAB transmissions. Eventually (>100k) my first one would pop out of reverse, the other out of 3rd gear. My mechanic - wise man- said "How much time do you spend driving in reverse?" He had a point. So I'd just hold it in reverse. Annoying, but not annoying enough to spend the $$$$ to replace the gearboxes.
Your car SHOULD be powerful enough to pull in second, as were my SAABS, and they had smaller motors. Also, the old British sports cars auch as the MGA and early MGB and early XKE had non-synchro 1st gears, which you couldn't downshift into. So it can, and is done. The 2nd gear problem would be more annoying to me, and you may eventually find this annoying enough to replace the tranny. I'm no expert on Volvo gearboxes, but the manuals don't seem to fail too often, so one salvaged from a wreck may be a reasonable alternative here.
BTW, if your car car is that old, you probably should find yourself a good indy Volvo mechanic, rather than a stealer. The indies are more adept at fixing the things with duct tape and Krazy Glue.
-Groundhog
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