Interesting you have mentioned this. I like the way you explained Volvo service diagnose and recommendation (I am pretty sure that they delivered it exactly that way!): "...They said that there was a TSB stating that ECU should be reprogrammed and updated with a new engine management program when experiencing this code...".

I had a similar problem with engine light and had a lengthy discussion at Volvo dealership about it. Notice that above explanation makes no sense, unless, of course, the Volvo has built such marvelous computer that is able to recommend a change of its own software.

The explanation is likely much simpler than that. After being squeezed into corner, the tech at Volvo service have admitted that there is nothing really wrong with any sensor or any other mechanical part in my car. Also, that original software did not turn "bad" suddenly. It was just from start a bad software that needed a patch. Responsible companies admit that and apply patches for free, especially if the car is still under warranty.
However, Volvo has found s smart way of not recalling the software and applying a patch to a faulty program for free. They threw a few features to the patch and they call it the "upgrade"! So, now, they can charge you, and thousand of others. Very smart.

I am glad that you have positive experience with the upgrade and may consider to give up and load it. How good is your mileage now? (l/100km)

Cheers,
Zagi