Bill, I had the same problem with my 98 V70. The key would actually turn 360 degrees and not engage. Sounds like you are in the early stages of mechanical ignition lock cylinder failure. Common, and not to tough to remedy.

Call the dealership, tell them your problem, and they will ask for your VIN. With this info, they will order you a new unit that will be keyed to your car so you will not have two different keys for door and igntion. the part should be around $110 US dollars. If you're inclined to make the repair yourself, I can describe in further detail how I accomplished this. Dealer would probably charge 1.5 hours labor for the job, so still not too bad.