Last week my 97 850 overheated when the thermostat went bad, and then caused a rubber tube to burst so that all the coolant came out of the system. The temperature gauge was pinned at the maximum for about 5-10 minutes before I was able to stop the car (yes, dumb move). I was on a major interstate with no shoulders in the middle of rush hour. Should have just stopped and made everyone deal with it.
So my indy shop replaced the thermostat and also said that the head gasket is ok. But I was wondering if the overheating incident will affect the future durability of the car and whether I should be concerned about the head gasket going bad at some point. Any advice would be greatly appreciated.

I can understand why you waited to pull over, Chicago and road construction just don't mix.
You now have a very iffy situation. The mechanic said that the compression was OK on all 5 cyl - head gasket OK. Did that same mechanic install the thermostat? The Volvo OEM usually fail in the open position, while aftermarket cheapies fail in the closed position. Find out what he put in there this time, and if it not OEM, have him replace it with a good thermostat.

Now you need to wait. Watch the fluid level in the expansion tank for a week or so to make sure it doesn't go down even a little bit. Check the oil, which you changed, to make sure it doesn't get muddy or cloudy. Check the tranny fluid for the same. Look under the car every day for even a drop of antifreeze, especially at the passenger side where the water pump is - you might want to pull off the cover over the timeing belt to take a better look at the water pump to ensure it is not leaking.
Damage has been done, but to what extent you will not know until you drive it for a while.
Get on Craigslist and start looking for 1998 S70s?

Klaus
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I still miss my 164 and my 854T. Just driving a V70R :)

Keep an eye on the coolant fluid to check if the radiator hasn't developed a internal leak that would alloy coolant and tranny fluid to mix. Not good for the tranny.

You probably did do damage, but there is very little way to quantify it.

Nothing you can do now--what's done is done.

Actually, one thing you can do is change the oil right away. By right away I mean, the next drive you take in the car will be to the oil change place.