Words NOT to live by, but every pre '76 Volvo I've ever overheated would start running poorly (cutting out...and missing) when overheated long before any damage was done. Of course, you don't want to push that.

I've also never had a 164 with a "hot" problem. In my experience they have always run nice and cool. I'm actually fixin' to put a higher temp thermostat in mine for the winter because the heater ain't hot enough.

Less than 200 degree water temp? doesn't sound so bad to me. No boiling? shouldn't be a problem. I'd say your temp guage is off. And I wouldn't trust one of them point and shoot thermal jobs... not in an engine compartment. I don't even know where the temp sensor is, but if its at the top of the motor, that is what you want to remove to accurately test the water temp. wait 5 minutes or so after shutting the car off....and stay out of the way when you remove that sending unit in case it sprays! I'd say that anything at or below boiling at teh temp sensor is OK.

-Matt