Hi there. My recommendation to you would be the following:

1) Replace the thermostat regardless. Use a Volvo factory replacement. This is good insurance and may solve this problem.

2) Check and possibly replace all fan belts. A slipping belt will cause the fan to turn less slowly and tend to overheat. This condition can be seen in idle and higher speeds with a slipping belt.

3) As a matter of routine and one way to avoid replacing the cylinder head, I'd preventatively replace the water pump with a new one. I have a preference for genuine Volvo parts as I think they are better made. Surely others will disagree and have their own valuable opinions.

4) I'd check the radiator to see what the internal environment looks like. A new radiator as preventative maintenance just give you peace of mind and these things will no longer have to be suspect to you in your quest to find this problem. Under no circumstances should you play with temperatures rising and falling so dramatically. It will certainly affect your motor, it's longevity and may ultimately cause an overheated motor condition which will surely cost you a ton of money in repairs.

5) Finally, I don't know if that car has one, but a fan/clutch would be my primary suspect if the car had one. The symptoms you describe sound suspiciously like a bad fan/clutch mounted on the water pump. My Land Cruiser was doing as you mentioned and the fan clutch "looked" new, but i just went ahead and replaced it, and wha-la...temps went WAY down and stayed there no matter if idling, pulling heavy loads, A/C on etc.

Best of luck and many more happy motoring miles to you.

Sincerely,

JB