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Regardless of AWD issues between the Subaru or the Volvo, can you find a v70AWD Volvo for less than $10,000. If so the mileage will probably be pretty high and that's not a real good formula for reliable transportation for the wife. Not having investigated Subaru, can you find a Legacy with say 70,000 miles for about that price? I bought a 2000XC last August with 44,000 miles and paid over $20,000 for it. I would think the price differences between the Subaru and Volvo, with equal miles on the clock, would be great enough that it would tilt you toward the Subaru.
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