hi Blair,
Is yours a 740 from '85-early 90's? If so,
I'm actually going to replace that same part of the exhaust(it's called the header pipe, BTW). Here's a few tips: this hole should be BEFORE the joint that leads to the cat; if your header comes down into the cat from Two pipes to one, then what goes into that hole is a plug with a screw type fastener ( I believe it has a square drive ).

The O2 sensor is plugged into the cat section itself, up on the front side of the cat section (what I mean is that the sensor is the hole right AFTER the joint between the header and the cat itself).

My problem is that when I bought the car, it had a vibration problem. I since changed the motor mounts, center bearing and mount, and exhaust hangers (were broken. 85% of the vibration is gone but the 15% is due to the fact that the tranny-exhaust bracket is missing (didn't know that until I did some research!). Part of the bracket attaches to a plate with two screw holes on the header. I just bought a new one for considerably less than dealer although its not VOLVO its BORLA(around $110 from www.foreigncarparts.com).

If your hole still has some form of threads, I would buy a new plug and screw form VOLVO. If not, you'll need a new header unless you can get someone to weld in a plug or something! If the header is pretty old to begin with I'd get a new one! BTW, if you buy a new BORLA header you'll need to bring it to the dealer to get a plug for it ( it has an extra plug hole than OEM). Anyways. I'm rambling! Hope this helps!