First off, check/change your oil and filter. Check coolant. Change plugs. Check rotor and distributor cap. The engine control system controls timing, so if the timing is bad you probably have a bad cam position sensor. Check/change the air filter. Check the air mass meter for correct function. Check all vacuum lines -- these are famous for failing in hidden places. Check electrical connections to all engine sensors. The sensors typically don't fail, but the connectors and wires do. Check compression, including a leak-down test.

Try an experiment: wrap lots of electrical tape around flame trap to seal hole. This is temporary to see whether it solves the smoke problem.

Probably the best thing is to take your car to a good independent Volvo shop and have them diagnose it. IMHO, an independent shop is more likely to give you sensible, affordable advice.

Good luck.
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-- Bruce / '82 244 (315k miles!), '86 745, '87 760Ti, '94 854