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To answer you second question first:
On the night before Thanksgiving 2000, I had a low coolant indication, and I posted on the Brickboard the question about whether you REALLY had to use only Volvo coolant. There was a Volvo salesman in the Philadelphia area (Yannis) who called one of his techs at home that night and posted an answer for me Thanksgiving morning. That's how great this board is. The answer was: Green Prestone is just fine.
To answer your first question, My 99 V70 T5 has very little tolerance for coolant loss before the light comes on. It will do what you described with the coolant above the minimum line. Whatever level you are at right now is lower than your sensor wants to see.
BTW, the Thanksgiving 2000 episode turned out to be a faulty low coolant sensor, since topping up the system did not turn it off. It was replaced under warranty. It turns out you can't buy the sensor. It comes with the reserve tank. If mine ever fails again, I am going to unplug it. Checking the coolant periodically, and monitoring the gauges has worked fine in every other car I've ever owned. I'm not going to pay close to $200 to keep that light if the sensor fails.
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