Pictures are worth a thousand words
Thanks, Dale, for your detailed pictures and descriptions. This 850 seems like a real pain! I just tore down the top end of a 1996 850 base to find a blown head gasket. The owner sold it to me for 1200, which was a bit pricey, but it was his payoff, so I grabbed it. It has 115,000 and was otherwise in good condition. Good tranny, new tires, body like new.
My issue has been time to work on it. It's been sitting now for a year and half, since I was only able to work on it for a few hours a week. Now, with a new baby, I haven't been to the shop in four months. I am hoping that my neglect is not making things much worse. So far, I've put in a gasket kit, replaced the coolant tank, some hoses, a ball joint, had the head machined and valves replaced, and installed a new oil trap system.
As a non-turbo, one thing that has to be done when replacing or fixing the oil trap system is a honeycomb filter (Volvo calls it a flame trap) that sets in the vacuum hoses from the intake hose to the oil trap. That honeycomb filter clogs solid with carbon if not changed at each oil change (or removed completely, according to Volvo's TSB), and can blow a head gasket in no time, which is what happened to this one. I had to replace all the lines and the intake hose because the plastic was so brittle and carboned that it had become one piece, and it splintered when I removed it.
When putting the 'valve cover' back on, despite removing the correct number of bolts from the head, I was short about 7. So, now to get the correct fasteners, and ensure the seal has held. Then the distributor, plugs, wires, exhaust cam sensor (the white part shattered mysteriously while sitting in the trunk with the rest of the parts), some vacuum hoses, new fluids, and putting the mounts back on, and I should be almost done. Since I've had the car, the battery has been down, so I haven't been able to read codes, but when we worked on it before, my buddy said the DLC wasn't connected to anything, so I have that to troubleshoot as well.
My dash has done the same as yours, only mine was caused by condensation. The entire interior molded. After moving it to a different location, in direct sunlight, the mold is gone, but the damage is done to the dash, so thanks for the ideas on fixing it. I thought it was a leaking winshield seal, but it's still outside, and it's no longer leaking. Maybe it's the sunroof drains plugged?
Anyway, thanks again, and good luck on the Ford.