After grounding the the blue and white wire from the test terminal...The engine would die.
You'll want to make sure that your IAC Valve and the Throttle body are clean before you set your Idle. Since the car stalled when you grounded the test connnector, it seems that your IAC Valve is working, -but you may want to clean it for the sake of not having to do it again later (see thread on cleaning the IAC Valve). However, I would assume that your Throttle Body probably has some varnish, sludge, and accumulation in it which is causing a blocked bypass passegeway.
Remove your accordian tube and inspect the throttle body. Observe the black thumbwheel screw on the lower front edge that is used for idle adjustment. Turn this screw to the left and back it all the way out. When it doesn't want to come out any further, gently pull while turning and it will pop out (it's retained by a small o-ring). Clean the throttle body with Throttle Body Cleaner (Valvoline, Pyroil, and STP come well recomended, -avoid Gumout and the cheap stuff). Work the throttle back and forth and open and close the butterfly valve. Spray the cleaner through all the vacuum nipples and especially through the bypass passegeway that you removed the Black Thumbwheel from (you should also notice connecting passegeways that lead from it up to the throttle-plate/butteryfly-valve area). Once it's clean, reinstall the black thumbwheel and turn it in so that about 50% of the threads are showing. Restart the car, warm it up, and then follow the Bentley instructions for setting the idle.
Note: The Black Thumbwheel Screw is what's used for setting the "base" idle speed. If it's all the way in, your base RPMs will be at zero (thus stalling the engine). The IAC Valve is used to provide supplimentary air to increase the RPMs during warmup conditions and when you have the AC on, and to keep the engine from stalling when it's in gear and your foot is on the break.
By the way, congrats on owning an '88 240. They're great vehicles and you've got the best Fuel Injection ECU, Timing Controller, and wiring harness out of all of us fellow LH-Jetronic 2.2 owners ('85-'88). I've got friends who are waiting in line for '88 240 Volvos.
God bless,
Fitz Fitzgerald.
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'87 Blue 245, NA 237K
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