Sounds like it could be worse than a slave cylinder. I had the same issue with my 88 740 Turbo. The problem turned out to be the pivot ball inside of the bell housing, had worn through the clutch release arm. I figured this out when I removed and re-assembled the slave cylinder, put it back in with snap ring and bled it. When I stepped on the clutch it blew right back apart. You'll find that there is not a "stop" on the amount of travel of the slave cylinder. The dust boot holds it togather when you install it. The proper operation of the clutch release arm is the only thing that keeps the slave cylinder from blowing apart. When the pivot ball wears through the release arm there is too much slack to hold the slave togather.
Needless to say, the repair requires removal of the transmission. The first time I did mine, I lubed the pivot ball with white grease. After several thousand miles I noticed that every time I stepped on the cluthch it would "creak". This was due to failure of the white grease on the pivot ball. About the same time, I had made up my mind to replace my M-46 overdrive with a M-47 5 speed. When I made the transmission swap I had a second chance to inspect and re-lube the pivot ball/release arm. This time I used anti-seize as lube and it seems to work much better. I'm not sure what Volvo would recommend as lube.
Overall this is not one of their better designs. I think they should have made some provision to allow periodic lube of the pivot ball. You'll probably find that you will have to order the pivot ball and release arm. I got mine from Groton.
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