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I got back a little late on this, but Rob is right. It definitely looks as though the head gasket is leaking. The Volvo mechanic should have spotted this. In the several turbo applications that I have torn down, every gasket showed stress at the number 2 and 3 junction. I've not had to change an N/A so can't comment on one of those. Just change the gasket and let 'bygones be bygones'.
Regards,
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Will Dallas, www.willdallas.us, www.willdallas.org, www.willdallas.com 86 245 DL 222K miles, 93 940 260K miles, 88 765 GLE 152K miles, 87 Honda Civic 96K.
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