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The cause of your oil leak is the black o-ring on the base. I have personal experience with this same o-ring which IPS supplies. On my car I installed a new Bosch distributor base with black IPS o-ring, and the o-ring leaked in less than a year. Volvo upgraded the o-ring material in the 1980s to the green material. The green o-rings are a different material and withstand the heat much better. I like to use the shaft seal which is listed (by me) in the 700/900 FAQ. I have a couple of IPS's shaft seals installed with no leaks, yet.
Do you have a Volvo dealer near you? I need to buy some more of the green o-rings next week, and I can mail you one if you need.
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