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I'd start with just the module replacement...or better yet, since there's a TSB describing a wiring repair to faulty crimps, you might explore whether this is all the solution you need. (That said, I guess module change out on 96 isn't uncommon; part is $416 from Volvo and $358 online.) Also, check this problem out with an independent Volvo technician as a corroborrating opinion on the dealer's diagnosis.
This is an acute problem in 96 850s and 98 SVC70s......I urge you to REPORT THIS TO THE NHTSA - if they knew the scope of the problem, they might ask Volvo to do something about it. Do it online in a few minutes at http://www.nhtsa.dot.gov/cars/problems/ivoq/default.htm
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