Are all the servo motors/flapper doors working?
With the engine off and key in position II, change the temperature setting from cold to hot, hot to cold and also switch the defrost/panel/floor settings. You should be able to hear the doors opening and closing. It could be that the door that controls the air temperature is broken in the closed position, not allowing air in from over the heater core.
I recently had this condition in my S40. None of them were working. Turned out to be a blown fuse for the rain sensing wipers (apparently the automatic climate control systems takes signals from all manner of things). So it might be worth checking all your fuses too.
Good luck,
Will
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