I own a 98 S70 T5 Automatic and have had this problem for a while. Now that the warm weather is finally here, I want run the car a little harder.

Problem: Under hard acceleration, from a standing start or when trying to merge or pass on the highway, when I reach about 4500+ RPM the engine either struggles to accelerate faster or cuts out.

When it cuts out, it is quite a shock because with the sudden loss of power, it feels like I have run into a curb. The engine does not shut off when this happens. Once it cuts out, I have to let off the gas and once I step on the gas again the power comes back.

This doesn't happen every time but it seems to happen when I need the power the most such as merging onto highways or trying to pass other cars at highway speed.

Service Info:
Regular air filter changes(I use Paper Filters - Have tried K&N with same problem)
August 2004 - New Plugs, Wires, Rotor
September 2004 - Throttle Body cleaning and new gasket
October 2004 - Vehicle in to Volvo for service. They found a twisted vacuum hose and untwisted it. The problem was resolved for 3 days and then returned.
November 2004 - Fuel filter replaced

The air pump is faulty (Buzzes every once in a while and throws a code).
I'm not sure if the air pump could cause this problem but I could be wrong.

Could it be MAF related or Transmission related? HELP!
I am looking for any suggestions. Any info is appreciated. Sorry for the long post.