rd,
My 98 S70 has been doing the same thing and your post inspired me to pull off the panel and take a look. It looks like where the cable from the latch meets the interior handle is the problem. The cable is not snaping in properly to the interior handle assembly causing the cable end to pop up and jam the interior handle. Is you handle jammed completely? Mine is.
I'm not sure though if the cable is the problem or the latch. I'm guessing the cable but I'm not sure if the cable is sold by itself. Let me how you make out and I'll keep you updated.
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Geo
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