You pose an interesting question.

I'm the type who gets a little emotionally attached to cars. If the car is generally in decent shape, you're happy with the paint, condition of the body and floor, the rubber door/window seals aren't leaking or wind-noisy, and you are ok with any noises/squeaks/etc than /I'd/ hang on to it and do the work. You'll never get what it's worth to you to sell it and unless you're taking on something pretty new, you're looking at a pile of work to take on another used one from someone else. You've probably put a lot of time/money into taking care of this one, so why throw that away?

On the other hand, there are some great deals to be had on newer cars. If you could find an '05 R you'd be looking at pretty serious car that would really be worth pumping some time/cash into. I don't know what one of those would be worth right now... maybe ~20k? That's a lot of dough to spend when you've already got wheels you're happy with... you could fix your car for ~5 times less
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1998 V70 AWD Turbo 195k+

Sounds like a nice "old" car that you got your money's worth from. Without grand delusions, even the platimun edition is not worth a lot of money.

Reworking the head is just shy of $1,000 because you will also want to do the 20 vavle guides and seals and even replace the exhaust valves while it is apart.

The rear main is tranny removal time and is another $1,000. Also a good time to check the CV joints and bearings.

Before investing in chips and free exhaust, etc., the engine needs to be brought up to Stage 0 or Stage 1. Your turbo is probably getting a little tired and you would want to upgrade it to a slightly larger turbo. A new chip is going to set you back at least $750, but the car will then have at least 275 bhp.

Personally, I would find a newer "R" model. Either a V70 or S60. Even at stock, they are really fast.

Klaus
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Proud owner of a 1967 220S

Even a Platinum Edition 850 will only garner about 10% more than a regular 850 T. If you have the skills and the emotional attachment to the car to go through all of the work necessary, by all means go for it. Volvospeed, Oregon Volvo Tuners, and a host of other high performance FWD sites can lead you astray as necessary to pull more than 300 hp out of your 5 cyl. if you have the inclination, time, and money. Let us know how it goes!