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Sounds like the sealer is not doing it's job. There is no gasket in that joint as the cams are running in holes where half of the hole is in the head and half is in the "cover". A gasket would be too variable in thickness so a sealer which is very thin is used to make the seal.
If the cover is to be reworked, there is a lot of labor and some amount of skill/patience needed to get the surfaces prepared, (real clean without any gauges), for new sealer. If it isn't done right, you will have leaks worse than when you started.
Lookes like someone already has tried the brute force method resulting in your stripped bolts. I would try putting heli-coils in the head, without disassembling the cover to fix all the stripped bolts. With all the bolts once again holding I would evaluate whether I wanted to go through the expense of replacing the sealer. I would find someone who is experienced with the sealer for that job like a dealer, or good independent Volvo mechanic. (Not the corner service station.)
Good luck and let us know what happens.
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'96 965 with 16' wheels at 114K. Had '85 745 Turbo Diesel for 200K.
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