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Hi,
This is most likely your PNP switch...the part was close to $100 when I had it done a little over a year ago. I had exactly the same symptoms as you...my mechanic who deals with lots of Volvos didn't believe me when I had him replace the part..and many people thought the transmission was bad, but the PNP switch replacement solved my problem completely. I have a detailed thread about this on here, but I can't find it right now...if I do I will send you the link. Feel free to contact me directly for more information. I have a 1995 854T with about 113K miles.
-Scott
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