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I know nothing of your particular car but I do know that Volvos and many other cars of that vintage have a ballast resister in series with the coil. When starting it is bypassed by the ignition switch and full voltage is applied to the coil. However I think you have eliminated possible problem here when you say that you hotwired the coil (assume you mean 12V applied to coil positive)
There is an old trick that I remember from some time ago. The coil actually fires when the points open, yes I know that does not sound logical but that is the way it works, (something to do with collapsing fields and such). Take off cap and position engine so that points are closed, turn on ignition, carefully lever open the points with the tip of something insulated and you should get a healthy spark off the coil HT wire. Another check is to make sure there is 12V on the ungrounded side of the points when they are open.
I can't understand how the distributor could become ungrounded but why not ground it with a wire and aligator clips or something. I would carefully inspect the condensor and points installation to make sure nothing his shorted or is open.
With all due respect to the knowledge and ability of you and your mechanic advisors yours is a classic case of diagnosis by parts replacement and yes it is very expensive, also risky because new problems can be introduced during the replacement process. Many "mechanics" use this method and the owner pays for it. Yes sometimes it is justified, especially for an intermittent problem but a good mechanic applies experience, knowledge and testing techniques to narrow down the possibilities. I'll shut up now.
Good Luck! post your progress.
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