OK, here's what's happening.
After the car sits overnight in subfreezing temperatures, I'll start it up and IMMEDIATELY the idle shoots up to about 2500. This can't be good. After about 30 seconds or so, the idle drops WAY down (to about 400 rpm) and fluctuates between 400-1000. As soon as the temp guage starts to move, the idle goes to normal levels (800 or so) and stay there for the rest of the day. Has anyone seen this before? Thanks for the help.

Two ideas:
1. As noted, the temp sensor is a prime suspect: if it breaks, the mixture runs rich. This is sometimes accompanied by black smoke out the back.
2. If after changing the temp sensor, the problem still persists, then your throttle position sensor has failed and is no longer sensing "idle". Change the sensor.

HI Dave: I did have the same problem with my 88 740 non-turbo . after checking things out I found I had a bad tempiture sendind unit. Mine is located under the intake manifold a little more than half way back from the front of the engine. It's a little hard to remove, but what I did was used a pair of wire cutters and cut all the plastic and the 2 round pin cintacts off. Then I used either a socket or small pair of vice grips and turned it out. You can only turn it a little bit at a time so you don't hit or bump into the knock sensor. Once I got it to move just a little I could unscrew it buy hand, the threads had anti-seeze compound paste on them . I put anti-seeze on the new temp. sensor-sender before I installed it as well. BEFORE you do this job disconnect your negitive ground cable from your battery ! When you are finished with the job re-connect the ground cable and start the engine , let it idle for about 5 mins. so the computor can readjust the idle and emissions settings. My engine ran fine after that , no ups , downs, tach all over the place and the temp gauge when back to reading normal instead of bounceing and dropping off at any given time. Good luck and I hope this has helped you and not confused you. Dan Metz. Please let me know how you make out and if I can help you again I will be glad to.
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Dan's 88 Volvo 740 GLE WAGON non-turbo

Id say its a good reason to check your engine temp sensor.

Lawrence