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I had a problem with my front passenger inside door latch that the pastic cable retainer piece broke on my '98 V70. Had to replace the cable mechanism (http://volvospeed.com/Volvospeed.htm has great instructions) which isn't as difficult as one would think. The OEM part (cable assy) was only $10 from a dealer. Anyway, I replaced this last night and all is well. Regarding your problem on the outside latch, there's a connector mechanism that attaches the outside handle to the latch that either came off or broke. You'll have the pull the door panel and latch out to verify (again, not that tough).
Good luck.
JTH
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