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Lots of stuff posted here for the searching, but here's a quick primer.
First, "stage zero" is to assess the condition of all rubber bushings. These include bushings at the aft end of the front A-arms; in the rear, there are 10 to check: 2 on each torque arm, front and rear on each trailing arm; and 2 on the Panhard rod. Given the age and mileage of your Brick, consider all of these candidates for replacement unless you have distinct knowledge they've been replaced within the past few years. Don't skip this stage - the benefits of other improvements won't be realized if your bushings are toast.
"Stage one" (making the stages up as I go along - find some old IPD flyers to confirm) would be to add IPD sway bars, and replace the shocks and struts with firmer stuff. I've tried Boge Turbo TS, Sachs Advantage and KYB (yes, all on this same car, a '92 245) and so far I like the current Bilstein Tourings best. There's a little noise from the rear mounts, but I can put up with that. IPD sells sway bars in 25/22 mm F/R and 25/25 F/R sizes (same for sedans and wagons), the latter being for more aggressive driving and lowered cars. New bars are great but do check the local wrecking yards. IPD will sell you new bushings for the front bar if you find a used set.
Stage One Point Five would be strut braces up front. The diagonal ones from the strut towers to the firewall make a big difference on long, sweeping turns. I have the lower braces as well, but they never seemed to make a big difference. If you can afford it, a lateral brace (tower-to-tower) would be a good addition.
Around this point you want to improve your wheels and tires to take advantage of reduced body roll. Bear in mind that 205 section width is the largest you can mount on a stock Volvo RWD wheel (advice from Grimshaw's Performance Handbook - I'm not making this up). Others here have successfully mounted 215s, but you need to pay close attention to wheel offset and inner fender clearance - no fun shredding a pricey tire the first time you make a sharp turn. 15-inch wheels from 700 series cars are widely available, but 16s will fill the wheel well better. Look for Hydra and Gemini wheels (16s) off late 940s. As you noted, FWD wheels will fit, and there are a lot more choices in FWS 16s as well as 17s (which I think are too much for a 200) but you'll need those expensive spacers to use 'em.
Along with good rubber, you need good brakes. 200s have marginal brakes due to OEM 14" wheels, weight and low horsepower. You want what you have to be in top condition, so you may need a fresh master cylinder and calipers, and definitely spring for the braided SS flex lines at each corner. Check over on the turbobricks site for what good pads are; for my aggressive street use, Axxis Metal Masters are OK and give minimal dust but I'm ready to step up to something better, possibly including drilled front rotors. If you go the berzerker route with your car, go see how Dave Barton mounted S60 calipers and humongous front rotors on his 240! (Just bring money...)
Right around here you probably want to replace your engine and tranny mounts as well. Engine mounts in particular should be considered standard replacement items every few years. Get the OEM units from Volvo.
Stage Two gets into lowering springs. Here again you have to be careful with tire fitment, AND there are a few other things to pay attention to when you lower the car more than an inch or so. One thing often neglected is the lateral offset of the rear axle due to Panhard rod geometry; if you lower the car more than an inch, make or buy an adjustable one. I question the use of OEM-type struts (Boge, Sachs, even KYB) on lowered 200s; here, the Bilstein HD or Konis might be a better choice but ask around, first - I think they're pretty stiff.
I kept my wagon at standard ride height, but I did add overload springs in the rear. This has the effect of a stiffer rear sway bar as it increases roll stiffness in the rear, which is why I didn't go with a 25 mm rear bar (plus, I carried people and dogs a lot when I set the car up, and the stock springs are too soft for a full load).
When you're ready to add power, the simplest route is to find a turbo from a 700 or 900, but you'll have to relocate the distributor. The turbo block has piston squirters which are not in the NA blocks (but you can add them simply enough, if the engine is apart). I put a VX cam and turbo exhaust in mine so it's faster then the run-of-the-mill 240, but... that's not saying much!
Nothing here that's special or that no one else hasn't done, just kinda put it all in one place for you. Enjoy!
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In God We Trust. Everyone else, keep your hands where I can see them.
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