Yes you have to replace the ignition but it is NOT easy, you have to replace the whole cylinder not just the electrical portion. I did it 2 years ago on my 98 S70, probably one of the tougher jobs I have done - cutting through the metal security collar is hard. However a garage will charge about $800 in labor around here, so it was worth it. I used a drill with a metal bit and a hacksaw to get through the metal. Replacing the new part was easy. You have to order the part through the dealer it comes keyed to your key/remote.

Here are the directions I used:

http://volvospeed.com/Repair/ignition_S80.html

Merry Christmas, though it sounds not quite so merry for you if you'll be spending it cutting through metal...