Hi I have a really low mileage 93 850 and was having all sorts of problems with the car's not working properly.
It was finally repaired by completely replacing the trans.
Seems these cars have a fairly comlex trans and not many mechanics understand them. I took this car to the Volvo dealer, $560. no repair.
To my reg. repair shop $500.00 plus no fix.
To a shop in San Pedro the Mechanic does two days of checks and they say it needs a trans.
Sure enough it works like magic now.
Service the trans and add a containor of additive to up the inside pressure.
Pray that you don't have to replace it caost me over $2500 after all was said and done.
Bill

Yes, Bob your exact description has been an ongoing thing with my '95 850 (non-turbo). I chose not to entertain any Volvo dealer at all because of their incompetence in most but not all dealerships. Instead I have had it to three different Indy transmssion shops in my area that were recommended to me and unfortunately the final answer was to have it re-built. As I speak my 850 is in the trans shop being taken apart and evaluated. Have you tried pulling any codes from the diagnostic box? When I tried to do this, I never was able to get a single code. No orange "up-arrow" either on the dashboard which normally would mean a new PNP switch. I assume your 850 is an automatic trans, when you stated "not taking it out of gear"? The one Indy shop told me the cause of the lag is a broken weld on what is called the "input drum" within the trans.
Apparently when this weld weakens and breaks the fluid seeps between the crack and does not allow the proper pressure to build-up before takeoff. I would recommend a few more evaluations at an independent trans shop. Ask around at your workplace and your neighborhood to see if you can find a reputable one and one that has worked on front-wheel drive Volvo's before. Good Luck!