I am new here as of today, but stumbled across this while trying to find a reason for the grinding noise coming from the rear of my 2010 XC70 with 300,000 kms on it.
My mechanic (now ex mechanic) replaced the rear wheel bearings and said problem solved.
Went back and he told me it was coming from the diff.
Living in the Blue Mountains, I approached Ausrover in Bathurst but they no longer do this repair.
My mechanic said he was not prepared to attempt it, Annlyn Motors in Penrith quoted me nearly $7k for a new unit plus fitting saying that the diff could not be pulled apart.
I parked it and bought a 3 year old XC60 instead.
Now the good news.
I found Hornsby Differential and Gearbox and gave them a ring. They knew all about this problem and fix many Volvos.
Quoted me $2750 drive in/drive out.
The car was with him for 24 hours and fixed with new pinion bearings (front and rear) plus the whole kit.
Whisper quiet and a pleasure to drive again.
Now I have two Volvo wagons.