I try to avoid my Volvo dealer after warranty for everything but parts ... and new cars! (I do have a tame indy Volvo shop nearby.) (FWIW I had my wife's Honda at the Honda dealer on Friday, and they're no better than Volvo dealers.)
There are lots of SVC70 turbo engines around. I'd have gone for a used engine on a car with that many miles in the first place. In fact, the whole engine/transmission/subframe assembly will bolt right in.
The rest of the story seems a little fishy. I suppose the turbo could grenade if the coolant hose broke, but wouldn't most of the shrapnel be filtered out in the intercooler???? I'd get an autopsy by a shop that didn't do the first work.
I do know that the car will run with the turbo hose off, because mine ran when the intercooler/radiator sandwich exploded when I ran over a truck tire. It ran like crap, but it ran.
-BTC
'98 V70T5M, 151k mi.
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