Thank you to all who have helped me try and get my 1992 245 running better.
Last night I spent a couple of hours in the garage and the car is now running well and all seems back to normal. Here's what I did.

1. Picked up a Volvo ignition wire that goes from the coil to the distributor cap and installed it.

2. Checked the timing belt to make sure the timing was still lined up. Everything was hitting the marks and the rotor was pointing at the position for cylinder #1.

3. Took a wire brush and poked and scraped the inside of the catalytic converter. I was able to loosen up some of the crud in there. The catalyst honeycomb grid is still solid and not broken or rattling around.

4. Bolted the catalytic converter back to the down pipe.

Started up the car and it idles fine and steady.
Took the car for a 25 minute test drive and it drove and shifted nice.
Power seemed normal. Took the car up some steep hills and also got it up to 75 miles per hour on the interstate. All seems good and well. The down pipe that bolts to the front of the catalytic converter has a hole in it and needs to be replaced.

Analysis and Lessons Learned:

A. The Brickboard rules. Thanks so much for everyone's help. This is a great resource with helpful people.

B. The main problem all along was probably spark, not fuel. The ignition wire that runs from the coil to the distributor cap seems to be the main failure, and might be why I saw the arcing at the coil. Replacing the cap, rotor, and spark plug wires also helped.

C. Don't use cheapie crimp on ground connections. When my son got stranded at church, the car died because the alternator ground wire broke off. I had a cheapie crimp on loop connection for the ground wire on the back side of the alternator. I've now installed a beefy ground wire strap that won't break.

D. Removing some of the gunk inside the catalytic converter might have helped relieve some of the back pressure. It likely did nothing. The cat seems to be in decent shape inside.

E. Checking the timing made sense and wasn't hard. Realizing that most men these days can't do it made me feel like a stud.

My son will be rolling around today in the Volvo going to school. So if he doesn't break down, that means I get to cut the grass after work tonight!

Tom
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1992 Volvo 240 & 1998 Volvo C70