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Laura,
Everyone here has given great advice. I'm happy to hear you found the problem, makes life so much easier not having to dig deep for it!
I'd like to add one more preventative maintenance item that you should check as soon as possible. Your car should have two more coolant system hoses which are part of the oil cooler. One looks like a "J", the other a short 90 degree bend, both can be bought for about $25 from the Volvo dealer (I ordered mine discounted from Borton Volvo). Both are located under the car just under the oil filter, passenger side. They are only found on the 740/940 turbo models.
These hoses typically get soaked in oil when the oil filter is changed. Over time they will either swell up (from the oil) or even be dried out to the point that they are brittle. The "J" hose on my (sold) 1992 745T broke, thankfully it waited until after I had parked the car! When I bought my 1994 945T the first thing I replaced were these hoses, with 85k miles on them, they were pretty close to failing.
Good luck,
Bean
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'80 242GT 91k, '94 945T 110k
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