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Hey Mark,
Seems the shift micro switch is a common failure (mine ha been replaced twice in 56,000 miles).
The symtoms you describe point to a failure of this micro switch.
I believe the Volvo part number for the MICROSWITCH is # 9466028-9 - I paid the dealer $12.81 for the part a year ago.
The repair is not difficult if you're handy around cars.
Took me about one hour - mostly removing and re-installing the center console.
If you want to try to do it yourself - Go to
http://www.volvospeed.com
and get into Bay 13 under Volvo Repairs and Maintenance.
Bay13 has excellent detailed illustrated instructions on how to do the job.
Good Luck
BTW - If it were me, I would not waste time testing your old microswitch - Just Replace it !
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