You're right in thinking that the AC condensor is 'stealing' cooling from the engine cooling system. There are a couple of things you can do, some more effective (and convenient) than others.

First, I've found that all my Volvo's gauges are pessimistic; they read higher than the situation is, just to be on the safe side. You might start with an after-market temp gauge for a couple of days just to see what the real engine temperature is.

Second, I'd try to see if there's enough space to move the condensor away from the radiator. Just an inch or so makes a huge difference in letting cool air get into the car's radiator.

Third, I'd consider trying to fit an electric fan in front of the radiator to supplement the engine's fan when the temp gets too high. You'd install a thermostatic switch in the radiator's cooling fins, so the fan would only operate when the engine reaches a set temperature.

And last (my favorite at the moment), is to mount a water reservoir and pump to pipe clean water to the front of the radiator/condensor setup when the engine reaches a predetermined temperature. You can use a large windshield washer reservoir and pump, and a patio misting spray tip. Wire it up so the pump comes on at a certain temperature. The mist of cool water can dramatically reduce the radiator temperature, depending on the ambient humidity.

Even after trying every trick in the book, I ended up making this setup for my car. I put the water tank in the trunk - I used a decertified Scott AirPack tank, so it looks like I have nitrous oxide...

You can also change over to the Volvo 6-blade fan, or an aftermarket flex fan. If your car doesn't have a fan shroud, it may help to make one up.

Good luck!

Steve
Baron of Greymatter
SoCal