“cooling system is developing rust deposits” Improper coolant/water mix and/or improper system flush. Do a complete garden hose flush, removing the T-stat, opening the block drain, and the heater hose going into firewall. Use 50-50 mix of Zerex G05 or Volvo coolant and distilled water. Auto Zone carrier G05 for about $10. The copper tubes going into the firewall is very soft. You will have to carefully cut the hose off. Read the FAQ.

“heater core gets plugged” Impossible, just impossible. Ok, a 99.99% improbability. The heater control valve is not working, or the vac line may have falling off… or the T-stat is stuck in the open position.

“Is it possible that the rebuilt engine manufacturer hasn't treated the engine internally?” Nope!

Did anyone have any similar problems with their Volvos?” Oh yeah. Not me, others have. :o)

Please read “Cooling System” in the FAQ in detail. http://brickboard.com/FAQ/700-900/Cooling.htm
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Tom F. Three 940s. '93 T-Rex now running. Mods, RainX. Lien holder on two more (the kid's). Rust In Pieces, '78 245