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Yes - thats why almost all conversions are done on later 240+ series cars - they have MacPherson strut front ends and a lot more room for an engine.
Still - I've seen more than a few 122's and 544's with V8 drivetrains - so with enough cutting and chopping it is possible. You might consider just ditching the Volvo front crossmember and putting in one of those 'Mustang II style' front suspensions - those certainly have the clearance for a V8 - and you could get other goodies with it like rack-n-pinion steering, vented discs, etc.
Alternatively you could build up a B20 to 200+ HP NA with several grand. Even more with one of John Parker's Volvo supercharger kits.
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