Your problem seems similar to mine, which I had felt occurred while letting up on the gas. Same symptoms.

My problem began with slight hesitations and has now gotten worse wherein the engine seems to die for a microsecond this causes the transmission to downshift. The engine restarts and in the lower gear races.

Do you see the simlarity here. Just replaced the rotor, dist cap and ingnition wires, checked for vacuum leaks and checked engine and transmission codes. None. Earlier during one of the severe hesitations the "Check Engine" light came on. The codes indicated misfiring in all cylinders, indicating the engine really had stopped for that microsecond.

Volvo had replaced the headlight switch on a recall and I had to replace the original equipment (7 years old) battery the day before the problem began.

Let me know if you find out what is causing your problem.