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Hey Dave,
The sensor could be bad, as you suspect. I would also take a close look at the condition of the wire that connects to it. I've had the wire go bad. I have seen different part numbers listed for your sensor. Tasca Volvo (www.tascavolvoparts.com) has the sensor listed in your first part number 1324081, without the dash for about 150.00. I wasn't able to cross reference the other part number you had. FCP Groton has a speedometer sensor, but looking through Vadis suggests its the unit for cars not equipped with ABS. The nice thing about Tasca is you can give them your VIN number, and they will make sure the part is suitable for your car. Not sure about how to test the sensor... Perhaps something ferrous with teeth chucked into a drill?
Regards, Jon 'Uncle Olaf'
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