Oh, how I hate to be the bearer of bad news, but . . .
Similar thing happened to my car, 1991 745 turbo, summer of 2008. Wife left house, HCV cracked, and she pulled over and shut down within a mile of home. Told her to start it up, watch temp gauge and drive carefully home. It did not go into overheat. HCV was spewing steam/coolant. I let it cool off and removed the HCV and hoses and capped off the connections. Car seemed to run fine, but something was wrong, hard to put finger on. She started drinking coolant, a little at first, then more and more. There was also something else that was just not right, but hard to put a finger on. Slowly, over the course of a couple of weeks, she began to show signs of overheating, the temp gauge would creep higher and higher. One day she just fully overheated and that was it. Time for a new cylinder head.
Short version: She, like your car probably did, warped her head during the short episode of loosing coolant. Symptoms were the same - drinking coolant and starting to show signs of over heating. It will probably get worse and worse.
Take it to a reputable mechanic (oxymoron?) and have them take a look at it. If you catch it soon enough, you might be able to save the head that is on the engine. If it overheats again and warps more, it might wind up needing to be machined way beyond the Volvo specs, which I advise against. But the situation is not going to get any better if you keep driving it. And, I strongly doubt that the problem is your water pump or thermostat.
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Scott Cook - 1991 745T, 1986 Toyota Tercel (Don't laugh, it is reliable, faithful AND gets 41 mpg!)
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