This sounds familiar to the same problem I had with a 2000 S40. My problem was that the sensor probe, that normally clips directly onto the fan brace, fell out of the clip and was hanging freely directly behind the fan blades. My temperature would be all over the place until I clipped it back into place.

Now, if your sensor IS loose, maybe when you turn on the AC the extra air being pulled through the radiator is being directed onto the sensor causing the higher reading. This is might only be true if your sensor is in the same area as the S40.

Check to see if the sensor is out of its place.

Miker