No! You don't have to replace the distributor!

If you have the 1975 electronic ignition system there are two connections
to the distributor (not counting the cap). In the bottom are triggering points
that actuate the injectors in groups of 3. They are connected by a connector
that goes in at a near-vertical angle in the lower part of the distributor and
has 3 wires in it.

Nearer the top of the distributor is the connector for the reluctor, which
in an electronic system does what the points would do in a mechanical system.
Usually these wires are not shielded but on the 164 (at least on mine) it
seems to be, and has a slightly different connector than other Volvo electronic
systems of similar age. This wire is crucial to the ignition but can probably
be fixed with a modicum of electrician skills. The connector for the shielded
wire unplugs from the distributor but is held plugged in by a small steel
bracket affixed to the side of the distributor with a screw. With care the
tiny spade connectors can be taken out of the plug and reused and the shielded
cable can be replaced or repaired. My guess is that it could be replaced with
two separate wires like the 4 cylinder cars have, but it might be better to go
back with shielded wire, which is available from Radio shack or the like.

Or maybe Volvo or Bosch could sell you a new wire......

--
George Downs Bartlesville, Heart of the USA!