Change the plastic heater valve. I would also replace the heater hoses and evaluate the upper and lower radiator hoses and the hose connecting to the bottom of the coolant reservoir. Replace as necessary. As far as the coolant reservoir is concerned, I would replace it with the coolant reservoir from a 960 and connect it to the warning lamp in the instrument cluster. See the 700/900 FAQ for information. If you don't want to go to the trouble of installing the 960 coolant reservoir I'll give you, for the cost of shipping, an almost new 740 coolant reservoir.

I would install new Continental brand v-belts unless the belts appear to have recently been changed.

Re-solder the fuel injection relay. Once again,see the 700/900 FAQ.
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john

Thanks for all the help and advice! You've given some good work to do that will take me a while given my schedule. I guess one question I have: Is there a good parts supplier to purchase all of the hoses at with one order? Do you have any online favorites? Should I try my local Volvo dealer?

Check the intake rubber hoses. They should look dry. If they're oily it means the turbo bypass valve is bad. Check the turbo intake hose on the bottom where it attaches to the turbo. If it's oily and soft replace it. They can collapse when tht turbo starts sucking in extra air. Make sure the plug wires are Bougicord brand. Remove and clean the throttle body assy. Remove and clean the IAC valve with brake cleaner. The valve device tends to get gummed up with oil vapors from the turbo. It should flop around freely inside the housing. Check the hose connection on the intake manifold from oil seperator assy. It tends to get blocked with hard carbon deposites.

Check and clean all grounds - engine straps, top & botton, left front fender, rear, etc.

Clean the pins on all connectors, apply dielectric grease and zip tie any that you can.

I recommend that you do one connector each week after you are driving the car, that way you will know where to look if your brick acts up.
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'96 855R,'64 PV544 driver, '67 P1800 basket case, '95 855, '95 854, the first three are mine, heh, heh, 485,000 miles put on 9 bricks

For peace of mind and to prevent worse damage, replace all the coolant hoses (including any to the oil cooler), the heater water valve, and the reservoir. Then keep a close eye on the radiator, especially the upper inlet, for plastic cracking. Radiators last a reliable maximum of ten years. Consider installing a low coolant warning lamp per the FAQ.
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See the 700/900 "FAQ" at the menu bar top screen left side.

take one of the coolant hoses off & look inside,Better to replace all the hoses including the heater hose & the hot water shutoff valve connected to the vacuum unit.That is plastic & if it breaks you lose all your coolant.drivers side,by the firewall.