The Air Mix control on my '96 850 does not appear to be working. There is little resistance when rotated, i.e. I don't sense a flap moving. There is no discernable variation in the air flow through the vents no matter the vehicle speed.

Just what should happen when this control is varied and what effect should I be looking for?

It allows you to have cold air coming from middle driver side vent and to have warm air everywhere else in "open" (all the way down) position, so you can have your feet warm and at the same time have cold air coming to your face so you don't fall asleep behind the wheel. when it's closed you get air as set your temp. control

With the fan off and the dash vent on, and the vehicle moving, should I feel outside temp air flowing through the dash vents somewhat proportional to the vehicle speed. Should the control allow outside to flow into the vehicle, because at present it doesn't.

it mixes the outside air with the inside Recirc air. the AC should warm up a bit when the mix is in, and i think it only affecdts the drivers air, check your manual, it explains how this works.