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A little hunting around on this board will get you some good answers - similar questions have been asked on here very recently.
First off, her 1999 has a lot of life left in it. If she still likes it she can save herself a LOT of money by sticking by it rather than going for a new one. Rotors, brakes, and tires are all wear items that you should expect to replace them periodically.
Second, be forewarned that they changed strategy with the V/XC70 line in 2008 and instead of basing it off the S60/D-segment platform they now base it off the S80/E-segment platform which is much larger and gets much less in the way of fuel economy.
The 2007 and older cars are much more like her current car (whether she wants that or not is up to her to decide).
I'm taking it from the email snippet that she's not a DIYer (if she was, she'd be doing all those maintenance jobs herself rather than looking for a new car) so the un-DIY-ability of the P2 cars shouldn't phase her.
The 3.2 and T6 get surprisingly good mileage on the highways, but it's pretty mediocre around town. I'm sure they're as reliable as any other engine Volvo has made. There is some good anecdotal evidence that the T6 in the XC90 didn't work out so great when they first started using it as they got too hot and burnt up their electrical stuff. Maybe that's not a problem with the newer cars.
My personal vote would be for a 2006-2007 XC70 which has the older style body, but has all the 'kinks' worked out from 7 years of manufacturing and upgrades.
Not many of us on here have much hands-on experience with the 2008+ cars.
I don't personally feel the new cars are priced very well either. They have their charms to be sure, but most of those charms can be found elsewhere for MUCH less money. Volvo has really let their prices creep up while chasing the Germans. And even at that, the 3-series wagon and the A4 wagon are both cheaper MSRP than the XC70 (though prob smaller too).
Subaru makes some excellent stuff that's pretty much like a japanese XC70 (like the current Outback), though the exterior styling is not my favourite. And it's a more traditional D-segment car.
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1998 V70 AWD->FWD->AWD Turbo 215k+
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