I have experienced a problem in the winter (even though we have such lame winters here in cincinnati anymore) with my defroster not able to keep the windows clear, usually when it gets down around 20 or below.I know that there are a couple of different temp. thermostats that are available. plus, the heater just doesn't seem to kickass when it is really cold. Would the hotter thermostat make that much difference? Also, it is a 245 wagon, so there is a lot more area to heat, and the side windows fog up and stay that way.

Check that the inside/outside(recirculate) flap in front of the heater core isn't stuck in the "inside" position. It's fairly easy to inspect by removing the passenger side panel from the center console.

For good fuel economy, low emissions, and acceptable heater performance, you should run the stock thermostat. In my 1990 B230F, this is a 92 C model.

Yep - I put the 92C stat in my '83 and it improved heater performance a bit. The hotter stat will get the engine up to a temperature where it will quickly evaporate off the condensation from combustion byproducts and reduce contamination of your oil. Volvo heaters are great units. Mine could roast a chicken on the coldest day of a Calgary winter. If yours is below par the hotter stat isn't really the cure (but still a good idea). If the recirc flap isn't the problem, the heater core may be partially plugged with scale and cooling system crud. Try a cooling system flush (eg: Prestone). If that doesn't do it, you need to disconnect the heater hoses- one under the dash at the firewall above the gas pedal, the other at the heater valve outlet, and circulate some higher strength stuff like "CLR" through the core. Sure worked great for me.