It is most certainly the thermostat....but

One thing to note if you plan to replace it yourself: you really need a long handle Torx-40 to reach the rear bolt of the thermostat housing. Without it, you will probably just strip the head because it is too difficult to align a short handle tool at 90 deg around interferences (I did!). Since a long handle Torx-40 isn't something that they sell at Sears, you will probably have to search around a little, but it can be had for <$10, so you will still save a lot over repair labor cost. Also, suggest you but the new thermo part from Volvoparts.com or other online source.