I have had the same problem with the 2000 V70 that I used to own. It is a broken piece of the lock assembly that is jamming it. If you remove the plastic cladding under the steering wheel you will be able to look up to see the mechanical part of the ignition lock assembly. It is pot metal, but there is a cadmium plated steel square staked in at the bottom (a couple of cm across, if memory serves). If you dremel/drill the staked parts out, you can remove the spring and the broken piece of the mechanism. This frees up the ignition to turn again. Then release the steering lock cable at the ignition lock assembly-- you can just leave it loose in there. Now you can start the car, but the steering lock will no longer be functional, but I wasn't worried about someone stealing a 20 year old Volvo!
I think there are picture tutorials on this over at Matthew's Volvo Site.
Good luck!
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