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I can't speak to the hose issue and Ringlee seems to have covered it head to tail, but I've been looking into this cap issue on my own 1985 745t and can tell you what I know.
The green cap has a pressure rating of 150kpa, while the grey cap has... 100kpa? Not sure, although I know the black cap is 75kpa. Anyway, switching to a higher pressure cap means that it will take more system presure to trigger an oveflow condition (out of the cap) than it does currently.
The benefit of a the green cap is that with each +2 kpa you get a reduction of 1 degree f... or something close to that. Basically, as you increase the pressure you decrease the heat and increase the efficiency of the cooling system.
The risk of this is that, if your cooling system is older and your radiator hasn't been replaced with a heavy duty jobber, you run the risk of blowing a hole in it from the pressure increase. Additionally, even IF your radiator has been replaced you run the risk of blowing out any of the 10 or so hoses that play a role in the cooling system. Worst case I can imagine is that the premolded coolant channels in your engine have weakened structurally over time and you blow through a sidewall somewhere. I don't think this last item is likely given what little I know of volvo engine's durability, but I like to account for every contingency.
I personally favor replacing the radiator with a Nissens 3-row, rewiring the aux electric fan to come on whenever the radiator hits 200 degrees (f), and going with a lower pressure cap if you can find it (I've only seen the 150kpa green ones). Volvo cooling systems are incredibly efficient, and my experience has been that the 75kpa cap is sufficient as long as the rest of teh cooling system is up to spec. I have a black 75kpa on my 745t right now and it works fine...
good luck,
rt
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