Below is some ABS troubleshooting info from Vic Rocha (posted here with his permission).

In my case, the problem was a broken(due to corrosion) ABS sensor wire, where it plugs into the wheel hub (I soldered it back together). I was able to find this fault thanks to the info on his webpage: http://home.earthlink.net/~vicrocha/Troubleshooting/abs_troubleshooting.htm

Ok, here is the info Vic emailed to me:

"There has been a few common problems associated with non functioning ABS units after they are re-installed.

First, make sure all the ABS fuses are in place and are not burnt. I saw a car once with one fuse removed. Check all the other fuses as well, not just the ABS fuses.

Second, the most common problem that has been reported is a difficulty re-engaging the large connector to the ABS controller properly. This has caused the problem you are experiencing several times.
I receive an e-mail like yours about twice a month and in every case, a fuse was not re-installed or the connector was not re-installed correctly.

Please remove and inspect the condition of the contacts in the large connector, do the same with the two wire connector.

Make sure the connectors fully engage properly. I still have problems myself installing the large connector. YOU SHOULD NOT BE ABLE TO MOVE OR PULL THE LARGE CONNECTOR AWAY FROM THE ABS UNIT. If the connector can be moved or removed from the ABS unit without releasing the black lever, then the large connector is not installed properly.


Also, you may want to clean the connectors with electrical contact or electronic component cleaner to make sure the problem is not a poor connection between the connector and the ABS unit.


Multiple problems are not common; however, they do occur. These are some problems that have been discovered in the past that has caused the ABS to malfunction:
Broken wheel speed sensor wires and/or wiring damaged by previous work. This is becoming a very common problem, these are the troubleshooting instructions to test the wiring. http://home.earthlink.net/~vicrocha/Troubleshooting/abs_troubleshooting.htm
Loose or missing axle nut. This will cause the sensor ring, that it's installed on the axle, to wobble and create an incorrect wheel speed reference.
Broken or missing wheel sensor ring.
Defective ignition switch. This is more common problem in 96-98 Volvos; however, we start to see it more often in newer years. When the ABS light is ON, wiggle the ignition key and see if that has any effect on the ABS light. Turn the ignition switch slightly towards the start position and also towards the OFF position and see if that has an effect on the ABS light.

In the year 1996 Volvo 850 model, there are two other issues that can cause the ABS system to malfunction.
#1 is a defective wiring under a relay, this problem was repaired on most of the cars under a recall. If yours was not repaired, you can still get it repaired under the same recall at no cost to you.

#2 A defective ignition switch. When the ABS light is ON wiggle the ignition key and see if that has any effect on the ABS light. Turn the ignition switch slightly towards the start position and also towards the OFF position and see if that has an effect on the ABS light.

Drive the car again to perform the self test."


Hope this helps you and/or others.
--
'97 850 n/a Wagon, 170K mi ... '98 V70R AWD 115K mi