The B23E is not going to give you much better than that for fuel economy around town. It should do much better on the highway. The camshaft is what is giving you a slightly lopey idle and the poor economy. It's a K grind and is one of the most aggressive cams Volvo put in the redblock engine. It's got a fair bit of overlap which could account for the rich smell at idle as unburned fuel is finding its way out the exhaust valve before it closes. If the car hasn't been driven hard you will find the intake ports completely clogged with carbon as the reversion at idle and low rpms tends to deposit crap up the intake ports. I've pulled heads off more than a dozen of these engines and every one was horrible. The head/cam combination is actually a nice performance setup but needs to be driven hard to appreciate it and needs to be clean to take advantage of it...

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Dale