I believe that if it is a weak tstat you can get a code like that. My tstat on a2000 S40 caused P0128. Temp indicator is also somewhat misleading. I understand that if the temp is within a specific band of temps it is "software" fixed to read in the middle (very stable). Only if the temp exceeds a VERY high overheating condition will the needle move out of the middle range. I understand this is to keep the nervous nellies (male/female) from unecessarily going to the dealer when the needle jumps all over the place. In actuality the temp will fluctuate normally.

Change the tstat, it's the cheapest fix first.

Miker
2000 S40