I did the test where I remove the spark plug wire one at a time. There was an almost imperceptible drop in rpm. What it would do however is stall eventually. This applied to each cylinder. So I havent been able to isolate it to anyone cylinder. The fuel injectors all fire and dont leak. I removed the fuel rail and cranked for a bit and they all appeared to have fired off at the right time. I tested them for leakage by disconnecting the wires to each fuel injector and cranking the engine again. I wasnt able to see any fuel leakage during that time.

The reason I'm leaning towards the ignition system is like I stated before. I connected an timing light and revved the engine to the point where I wasnt able to visually see the light strobe off, to the point where its as if its always on. I know it misses because at around those rpms the engine would miss almost at the same time the light would 'skip a beat'.

They pulley is fine because when I removed it from the crankshaft to replace the belt there was no noticeable wear or tear on it. The engine has around 90k, I dont think (I could be wrong) the pulley would act up this soon in the game.

"but this is very uncommon on the Volvo overhead cam engine, and it generally results in a regular skip, which is more pronounced at idle (until the valve gets bad)."

Its coincidental that you say this, there is quite a noticable but erratic skip at idle. Also there is some slight clatter coming from the head. And I'm afraid that I'm not going to entirely discount this diagnosis. On the other hand I somtimes remove the oil filler cap when the engine is operating and it spits out quite a bit of oil. This leads me only to believe that there is sufficient oil coming into the head.

Cap, plugs, wires, rotor. Thats all been replaced with top notch components. And none of the items show any signs of cracking or tearing.

Thanks,
Steve