hmmm...i think this is not entirely accurate...

1. the 850 auto box famously doesnt have an internal filter (its one of the things thats often held agasinst it!)

2. volvo recomend that the tranmission fluid is cahnged every 37000 miles IF the car is used as a taxi or for continual towing, othewrwise they recomend inspection of the fluid and change as required...

3. given (1) above i think i would tend to be a little wary of the statements made by the shop (they may be correct that this has happened and its blockin g things up..but not a filter....which you might reaasonably expect them to know...)

4. If it was me I would replace the transmission switch anyway, and do a fluid flush and then see what happens, realistically you can do both for a lot less than sixteen hundred quid and look at the swithc as preventative maintenance...the fluid well its a 70 quid punt...but it might telll you a lot!
I did mine 2.5 at 60k and awas amazed at the vile stuff that came out and it made one hell of a diference...

5. The shop may be absolutely right...on not...but got to be worth doing 2 jobs you can DIY and for minimal cost first...