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Sorry about the ugly surprise on your garage floor.
When I got my 850 it was a leaker that responded to two doses of the Lucas RMS treatment, the leaking, along with a switch to synthetic oil, got worse before it got better. Now the engine burns some oil but no engine oil puddle anymore.
(I'm convinced that dyno oil is poison in the 850 engines)
The other alternative is here:
A very nice write up for your reading pleasure.
http://www.matthewsvolvosite.com/forums/viewtopic.php?t=28973
If you yank the engine, you can do all the seals, and T belt and EGR service etc
easier. Dunno if an engine overhaul parts kit is reasonably priced?
There's some youtube video's about pulling 850 engines as well.
BTW some of the Junkyard mechanics might replace an engine for short money?
That's another Avenue to explore.
Bill
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