you list two separate problems: oil pressure idiot light coming on at idle/low rpm; and dipstick popping out of tube due to excessive crankcase pressure.

1) low oil pressure....since oil pressure is what keeps a motor alive...we'll hit that one first.

as was suggested, you need to hook up a real oil pressure gauge to the motor in order to know what the oil pressure actually is. That oil pressure switch is a NC [normally closed] switch that is opened by oil pressure over ~5psi. Those switches DO go bad. And, the wire going to it from the idiot light in the dash is also known to end up with crumbling insulation and short to ground, causing the idiot light to flicker or come on.

...your disconnecting the pressure switch wiring, and the idiot light staying off, is a correct result.

So, you need to find out what the oil pressure actually is. Volvo, in a continuous moment of stupidity, did not find it important to supply 700 turbo cars with oil pressure gauges. [but, that is a rant for another time]

The easiest place to hook up a real oil pressure gauge is at the block fitting where the oil pressure switch is installed. It is a metric thread on your '90 B230FT. [someone can fill in what the tread is, I don't recall off hand]

Re oil filters: forget the Mobil 1 filter. Use the Mann W917. Very well made; and they do the job.

I've converted 'older' motors to full synthetic motor oil....Mobil 1 or Castrol...and did not have any problem with increased oil consumption. YMMV. My current motor...B21FTi...was converted to Mobil 1 15w-50 after it had ~200,000 miles on it. It now has over 400,000 miles on it. The oil consumption/oil leak problems that I had were caused by the high miles, excessive boost, and insufficient crankcase ventilation capacity....NOT by running a full synthetic motor oil. I run two catch cans. motor stays dry. And with the dual catch cans, oil use/loss/burning is actually reduced. [and Yeah, I can still burn some oil if I really romp on the boost.]

back to oil pressure:

.....IF the pressure gauge shows really low oil pressure at idle....as in somewhere near 5psi, which is low enough to let the switch close and turn on the dash idiot light,

.....THEN, you have a problem....

BUT....before I would run about and scream and shout, I would change the oil to something that is not quite so damn thin. Something like 15w-50 or 20w-50. And take some pressure readings.

IF the pressure readings are still really low at idle, then you can feel free to scream and shout some.

...because....you have a problem. And fixing THAT problem is not going to be easy: the oil pan will have to come off so that you can access the oil pump transfer pipe and it's two Orings [one of which has probably rolled past its retaining ferrule on the transfer pipe [like John showed in his pic; and like I show in one of my pics on pbase]

Pulling the oil pan is not an easy job. The only person I know who has pulled the pan on a 700/900 without dropping the crossmember is Bruce ["Lucid" here].

Before you do the drop-the-pan routine, see what the oil pressure is at 2000 rpm and at 3000 rpm. It should come up to over 40 psi at 2000 and 3000. If the oil pressure does not come up to ~40 psi, yeah, you really do have a problem.

2) dipstick popping out of its tube: excessive crankcase pressure.

[Agreed: doing a dry/wet compression test is needed. In order to get a good idea of just how much ring wear there is.]

...probably due to the things I list in my pbase gallery on crankcase ventilation that you found.

For a boost motor that has over 100K miles on it, adding in a catch can setup is a wise choice.

AND, there is something that you can do to help reduce the crankcase pressure while you have the oil pan off:

...cut off that stupid oil drain tube right there next to the oil pump. Cut it off above the retaining bracket that holds it in place.

[yes, I do NOT reinstall those stupid useless POS tubes. And when I do have a pan off, that tube GETS CUT OFF!!]

Doing that will basically double the size of the venting passage to the underside of the oil separator box. Which, when done in conjunction to adding in a catch can setup, takes care of the crankcase pressure problems.....for MANY miles.

good luck. You are going to need it.

TF