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My '94 850 sedan had similar problems. The switch in the overhead light cluster had failed. Replacement cluster (switch not sold individually) was about $35-50, affordable by Volvo electronics standards. (Ouch!)
Replacement was easy: use small blade screwdriver to carefully pull the cluster cover down from headliner (held in by springs). Two Torx screws hold the rest of the cluster to the roof. The electrical connector pulls off fairly easily -- be careful not to break the retaining arms. Replacement/installation is exactly the reverse. Tighten the Torx screws carefully so you don't crack the plastic.
I think I got it from Beechmont or Siefeldt Volvo. My local dealer wanted much more, of course, which is why I don't buy much there.
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-- Bruce / '82 244 (315k miles!), '86 745, '87 760Ti, '94 854
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