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The idle 'hunting' can be a lot of things, the AMM is starting to go, bad rpm sensor cable, bad ECU ground to the fuel pump relay (do you have the Bosch xxx561 ECU? this is a problem with that ECU), or a bad or weak O2 sensor which is sending a poor signal to the ECU and the motor's A/F ratio is constantly being modified and attemting to correct the mixture.
Try checking these components, and don't ground the IAC while the car is running or otherwise. If the idle is different when you ground or remove the lead the ECU is trying to stabilize the idle and that is working properly.
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'89 245 Sportwagon, '04 V70 2.5T Sportwagon
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