There are a number of reasons that cruise control won't set (or stay set). Replacing the expensive and hard to obtain stalk lever with the cruise switch should only be done after a proper diagnosis unless you have easy access to another for a quick swap test.
The first thing is to check the fuse.
The cruise switch in the turn signal stalk is generally a very reliable component and near the end of the list of likely suspects. If you suspect the switch then open up the steering column housing and locate the switch connector to open it up for testing of the switch using a multimeter. You need to verify that all of the Set, Resume and On signal outputs get through the switch from the common input. You will want a wiring diagram for the wire colours, preferably a Volvo green manual, but anything of a similar 240 year will probably do. Typically for Volvo RWD in the column connector for the stalk, pin 1 is a +12V signal from the cruise control module, with associated outputs on pin 2 (On), pin 3 (Resume) and pin 4 (Set). If continuity through the switch doesn't test out then try spraying with contact cleaner into every orifice.
The most common problem areas for cruise control are the cutout switches, either improperly adjusted or worn. This includes the cruise cutout switch on the brake pedal and the separate brake light switch on the same pedal. For a manual trans there will also be a cutout switch on the clutch pedal wired in series with the brake pedal cutout. These switches should all be tested separately with a meter to confirm operation and adjustment.
Note that there is normally a vacuum line on the brake pedal cutout switch that vents to open when the cutout switch is depressed. This is the failsafe cruise cutout in case of a wiring short. If that vacuum line is disconnected or damaged, or if it leaks inside the switch (uncommon) then cruise control is also tripped.
The cruise control enable/trip circuit is rather tricky. The cruise control module needs a trickle path to ground through the pedal cutout switch (switches if a clutch) which then goes through the bulb out sensor and through either of the brake light bulbs (without illuminating them) then to chassis ground at either/both taillights. If neither of the brake bulbs work then this trickle ground circuit cannot be completed. The other cutout function is activation of the brake light switch on the pedal. When the brake light switch is activated, 12V now appears on the cruise cutout circuit and defeats the trickle path to ground, thus also tripping the cruise function whether or not the cutout switch has tripped.
I'll mention that I once adjusted the cruise cutout switch a bit closer to the hairy edge so that if I lightly touched the brake pedal it would trip cruise control without illuminating the brake lights. This seemed to work fine for a number of years, but on long highway trips I started noticing cruise control cutting out occasionally on its own. First reaction was of course to wonder if the stalk switch or the control module were doing this, even a split/loose vacuum line. Keeping the brake pedal lifted with my toe soon proved I'd simply over-adjusted it.
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Dave -still with 940's, prev 740/240/140/120 You'd think I'd have learned by now
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