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Robert,
Sounds like your main problem is overheating--a problem with the cooling system. Things that might cause overheating include:
1. Low coolant level (possible causes include leaking hose connection, leaking worn out water pump, leak around water pump gaskets)
If the head gasket is bad you can loose fluid too. It could go into a combustion chamber. This would be very evident because it would probably show up as white smoke out the tailpipe. Or it could leak out the side between the block and head (This isn't very likely.). Sometimes a leaking head gasket will pressurize the cooling system and cause a gyser when you open the cap on the fill tank.
2. The thermostat could be stuck closed (that will really raise your temperature (bad situation). One way to check it out is to feel the side of the radiator. After the car is warmed up then the radiator should be hot from top first and move to bottom (top first becuase the coolant is being heated in the head and released past the thrermostat through the hose and into the top of the radiator). Cold coolant is being drawn by the water pump from the bottom of the radiator.
3. The fan can be the problem. The fan is temerature controlled. Not sure how to test this other than visually. Be sure that the shroud is on the fan so that air is forced through radiator.
Others on the board will probably add good stuff to the three points I have listed here. The point is that an overheating problem is most likely to be associated with a cooling system problem.
Now a note on head gaskets (I have some recent experience from replacing the head gasket on a couple of Volvos I got very cheap):
When a headgasket goes usually you will have two foolproof ways to know it. No power (if the car even runs) and nasty stuff comming out the tailpipe. On of the cars I had coolant coming out the spark plug holes when I removed them. In both cases the reason I had to do head gasket jobs was that both of these cars ('89 740Turbo and '88 240) had experienced a failure of the cooling system (more than just overheating). In one case the radiator failed and the owner kept driving. In the other case the owner kept going after the waterpump self destructced (not pretty). The amazing thing is that in both cases the heads servived without damage. I spent $55 each to have the heads resurfaced. The valves were ok. These Volvo heads were pretty durable given the obvious severe overheating. If one of the heads had been bad they are still relatively inexpensive from auto recycle yards ($50 at a U-pull place or $125-$150 in regular yards). The head gasket kit is about $45. A waterpump is about $45.
The reason that I acquaired these two Volvos so cheap is that they were given $1000 quotes for a head job. They were also cautioned that when a headgasket goes due to heat you may have to replace the whole engine ($3000) and you won't know until you get into the job whether it is a just a headgasket job or the whole motor. A head job involves a lot of labor so $1000 isn't unreasonable. It is also something some shade tree mechanics can do if they get the car cheap enough and have some time to do the work.
So, I would suggest that you get a second opinion from a shop that checks out the reason for the overheating and to see if there is actually a headgasket problem.
I am sure that others will weigh in with other comments that will be helpful to you on your next move.
Mike
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