Sorry for the long posting but I wanted to give you as much detail as poss.

Name Gary Phillips. Location England. U.K
Vehicle, Volvo 850 GLT 5 door Estate / Wagon. 1993 model, 90,000 miles.
Engine type B5204S 1984cc, 20 Valve normally aspirated.
Transmission type AW 50-42 LE Computer controlled fully automatic 4 speed.

The problem / fault,
On Tuesday evening after a normal journey of about 5 or 6 miles I returned home, whilst reversing slowly in-to my driveway the vehicle came to a halt, when I gave it a little more acceleration the car started to move forward. The gearshift is in R but the vehicle is now moving forward after initially moving backwards.
I put it into neutral and rolled down the slight incline and parked on my driveway.
I have been on several short test drives with mixed results on each occasion, these include;

1. When in D and with gentle acceleration the vehicle moves forward but only in first gear, then at about 10 mph when it would normally shift up to second it seems to go into neutral and the vehicle coasts for a short time, as it looses speed it pops back into first gear, the cycle then repeats between first gear and neutral.

2. When in R the vehicle moves forward, I apply the foot brake when this happens and therefore I do not know how far or how fast the vehicle will travel when moving forward after selecting R. However I have noticed that there seems to be some resistance like the handbrake is slightly on and more acceleration is needed in order to move the vehicle.

3. When I select 3 or L the vehicle behaves the same as in D ie, first gear only.

4. Park and neutral seem to be behaving normally.

Observations,
The service reminder light came on about 2 weeks ago but as the vehicle was serviced last September I ignored it. The garage that recently serviced the vehicle are not a Volvo dealership therefore, I assumed that they had simply overlooked to re set the light as it was not illuminated at the time of the service.
There was no prior indication that the fault was about to occur, no bangs rattles strange noises or anything like that, the vehicle has been used daily without any problem since last Saturday when I fitted a new Battery and a set of spark plugs.

There are no warning lights or fault lights illuminated on the dashboard / instrument panel, ie blinking / flashing arrow. (the bulb is good as it lights up when in 3 or L)

Action taken;
After reading several posts on the Volvo forums and reading the transmission section of my Haynes manual, I have done the following;

I have checked the transmission fluid level when cold and again when hot and it is within normal limits on both the hot & cold side of the dipstick. However I do not know if it has ever been changed / flushed as I have only had the vehicle for 7 months

I have repeatedly shifted the gear lever from P to L at least 20 times with the engine running and foot brake applied. (A ratchet cleaning)

The LED diagnostic unit in the engine compartment gave me a fault code 1-2-4 which I believe to be “Driving mode selector circuit shorted to earth” I have removed the driving mode selector switch from the console, dismantled it, cleaned the contacts within it and refitted it. (Note, with the switch removed I also got the fault code 1-1-4 “Break in driving mode selector circuit” but I expected that would happen with the switch removed) I then deleted the fault codes from the ECU with the flylead in position 1 of module A. The reading is now 1-1-1 “no fault detected”

Following this I went on another test drive, this time in SPORT mode and again with mixed results;
1. P and N worked as normal
2. In D acceleration was good up to about 25 mph and then it seemed to level out.
3. Initially when selecting R the vehicle moved forward as before, then after about half a mile driving forward in position 3 I stopped and tried R again and reverse worked but it also reversed in L. I then selected D again but I got neutral, then all shift positions including R gave me neutral.

Totally confused and about half a mile from home I put it in P and switched the engine off. After a couple of minutes I started the engine selected ECON not SPORT shifted into D and crept home at about 10 mph.

After reading other posts on Brickboard and an article on PNP switches (a.k.a Gear Position Sensor) I am wondering if this could be my problem, but the PNP replacement instructions say that;
“The requirement to replace the PNP switch is usually prompted by the up arrow on your instrument cluster flashing” (Not on mine)
“Maybe the mode select switch flashing between modes” (No)
“Possibly the turning on of the check engine light” (Yes, but about 2 weeks ago)
“You might also notice that your car is stuck in 3rd gear” (Nope)
“The first thing to do for a 313 code recovered from the A-1 diagnostic socket is to clear the code and then do what I call a ratchet cleaning.” (No 313 fault code given)

I am now very confused, the symptoms are like those of a PNP switch fault but without any of the confirmation warning lights or error codes.
Can my fault be the PNP switch or is this a more serious problem?
Any help or advice appreciated.
Thanks for your time.