hi again,
right im not sure that the t/c lock up would even be happening at 40mph.but even if it was, if you are in 4th gear doing 40mph then there would be very little load on the engine as you are just cruising so i dont see why t/c problems would make the engine bog down.
a way you can test t/c lockup operation is to tap the brake pedal with your other foot as you are driving and see if the revs rise slightly as this should cause the t/c clutch to release,this will tell you if the t/c even locks up or not at this speed.
your problems are more likely to be engine managment related,if the gearbox was at fault the there should have been a message in the display saying "gearbox service required" or "engine service required". best thing to do would be to visit your volvo dealer and get them to check for fault codes (dtc's) on the car, this will give them and you a starting point as to what needs doing.
from memory there are several software upgrades for early 01- v70 auto transmissions and your problem may well be software related.

regards
steve.