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Any chance of getting an EZ-out into what's left? Without seeing your sender, my guess is that it's not a real solid thing, but rather a copper-jacketed affair swaged into a brass or steel plug which has the threads. Assuming you didn't use gorilla-level torque to install it, the Ez-out should work. You don't want to pierce the piece that's left, though, since that would risk putting swarf into the oil line.
FWIW, the Volvo oil temp sender mounts via the drain plug - a little vulnerable in my book, though. Given the time and shop resources, I think I would modify the oil pan by welding a fitting onto the side (probably the intake side to avoid exhaust manifold) to accommodate the temp sender. Next time the engine comes out, that is .
One thought I had to give yourself a little working space without dropping the engine is maybe to pull the front engine mounts and lower the front of the engine a couple of inches. Since the trans mount would still be in place you don't want to lever the shifter into the trans tunnel, so great care would have to be taken. I'm also not sure how low the engine can go before it runs into the crossmember or other interference occurs. Just a random thought as I sip coffee 3000 miles away...
Good luck!
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