The engine is the same as in the S70/V70 T5s so I would think
any one would do.

I have not heard of anyone over boring the cylinder. The engine
displaces 2.3L because Volvo gave it thicker cylinder walls then
the 2.4L for strength and heat handling capabilities (so stock, it
is under-bored). There is even a 2L version for specific markets.
I'm not sure if you could get the same quality pistons as the OEM's
if you over-bored (OEMs' are forged).

I would think with a larger turbo and some work on the fuel injection
you could get 300 HP without opening up the engine. Chipping
the stock turbo with a cat-back exhaust is reportedly good for about
285 HP with a cost of about $1500. Pretty good bang for your buck
there. Thats enough power to make traction your biggest problem
(it is front wheel drive after all).

Of course the weak link in the powertrain is the transmission. It
is reported good for about 300 HP. After that, you need some custom
work in the tranny area, too. In fact, the stock ECU already limits
torque in first gear (for the automatic transmissions) to prevent
transmission damage.