Thanks to Blue Goose for posting the link to my canned post on this subject, but I want to be sure you don't overlook it. You can see details below, followed by a growing list of success stories.

<=======(canned post)==========

You have the Volvo/Chrysler ignition used on 240s from mid '81 thru 1988. It's been found that the V/C Ignition can contribute to High NOx, and that plugging the vacuum line to the ICU can reduce NOx levels, with little or no effect on normal operation. Note that this is NOT a guaranteed fix, but worth a try if your other numbers (and cat) are good.

This is my canned post on the subject. It might work for you as it has for several others, especially with a new cat. This isn't my own theory -- I just happened to find it on a 'net search in 2004. For a technical description, see the original post here, and the first success story here.

Other positive responses are posted in this thread and this one,
and one more here.
Yet another one .
And another on 2/04/06.
Here's the latest, from 3/12/07.
And 1/29/08 Here .
Also 7-09-08 Here.
Another reported on 3-26-09

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Bruce Young, '93 940-NA (current), 240s (one V8), 140s, 122s, since '63.

As volvo245 kit mentioned, alcohol burns cooler and cleaner. This is why E85 is being pushed. It might work for you.
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1980 245 Canadian B21A with SU carb but electronic ignition and M46 trans in Brampton, Ont.

High nox is from high combustion temps. Low coolant, intake leak or vacuum hose cracked, maybe an o2 sensor biased on rich or lean. Does the tech check the timing? If not you can retard it a little bit and that will help. I have seen failed test's on this forum of cracks or leaks in the exhaust system like the header pipe. Im assuming that your flame trap is in good order to, could be a leak under the dash for the heater controls also.

Here's lucid's post on the issue:

http://www.brickboard.com/RWD/volvo/1129852/220/240/260/280/high_nox_volvochrysler_ignition.html
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1986 Volvo 245

Okay, this may be the remedy but I'm not 100% sure. Years ago I had this carbureted Toyota that wouldn't pass emissions. A guy I worked with from California told me that if you get your fuel tank as empty as you can and add 1 bottle of Isopropyl alcohol that you'd pass. So I took his advice and not only did I pass but the emissions guy said that mine was the lowest he'd seen all day! The reason I said that I'm not 100% sure is because I don't remember what part of the test that I originally failed so I don't know if it will help your NOX. It might be worth a shot. If you decide to go that way, let us know how it turns out. Good Luck!