(1)- I've pulled the Head but not the pan yet. The bores are very worn. It seems the wear pattern is mostly on the exhaust side, with a deep ridge on that side.I'd say the block would have to be re bored.Do these engines use Chrome Rings to cause this amount of wear?

The Volvo B230 engine has a high nickel content and it is not uncommon to see 200,000 mile engines still showing the cylinder hone marks. I think someone before owned the car did not change oil, or operated with an air filter with a hole in it.

(2)- What kind of Thrust bearing does this engine use. Mine appears to be non-existant. There looks to be about 1/8" Crankshaft Endplay.

This first version of the B230 engine had the thrust bearing incorporated in the third main bearing. I have heard that crankshaft endplay was a warrantee problem for Volvo on these engines. The K block B230 engines have the thrust bearing re-located to main bearing number 5, and there were no more crankshaft endplay problems.

(3)- I understand there are 3 versions of the B230FT. The original, the K and the final and improved version (Starting in 1989). Will this final version work in my 1986? I'm using Garrett Watercoold Turbo & 4 speed w Overdrive.

There are probably at least four versions of the B230FT. All engines from early in the 1988 model year with the re-located thrust bearing are K blocks. The next upgrade was the 13mm connecting rod early in the 1989 model year (this engine is still a K block). The B230FT received piston oil cooling sometime in the 1993 or 1994 model years. The pistons were revised about the same time. I am also told that Volvo made the block casting heavier and increased the cylinder wall thickness in the 1995 model year. Any B230FT will work in your car. Just use the original fuel injection and engine wiring harness. Some other parts need to be changed, too. Post again if you find a used engine. My recommendation is to use a K block with the 13mm connecting rods.