In reply to motomad1:
HP. Not really, throttle response, a little. Swap the throttle blade (butterfly, or whatever you call it) from a 960 into the 850 throttle body. The 850 throttle body has a plastic baffle in it, to help keep soccer moms from spinning their tires when they mash the go peddle.
There's a baffle/thermostat in the air filter box that directs where the engine get's it's fresh air from. It's choices are a very restrictive corrugated tube attached to a heat shield on the exhaust manifold (it's more of a headder), or a ram-air style intake above the radiator. If the thermostat fails, which is common, the baffle closes off the fresh air side, and will only be able to intake hot air from the small tube attached to the exhaust. It's supposed to help with engine warm up and prevent throttle body icing in colder climates. Most wedge the baffle to the fresh air side. My air box is completely modded, entire baffle assembly removed and gutted. Some scoff at it and claim they've had icing issues with just the baffle wedged to the fresh side, I've spent a winter in OH with it now with no problems.
Otherwise, "Stage 0" is what all the Volvo nerds call it. Plugs, wires, cap, rotor, etc. The consensus is that there is no cost effective way of making serious power gains with a N/A Volvo. If you want power/speed buy a turbo. There's a guy who built a sweet N/A 850 track rat, ITBs, head work, gutted interior, stand-alone ecm, etc. He claimed it to be about as fast as a stock T5.
Now handling YES there's plenty you can do. IPD will be your source for a lot of it, or at least part numbers. IPD front and rear sway bars, I wouldn't waste money on HD sway bar links, but that's my opinion. Konki Yellows or FSD, with some Eibach or H&R springs. Use XC90 spring seats, and the IPD HD strut mounts have good reviews. I've got the cheap OBX strut tower brace they sell on eBay, it's got great reviews considering how cheap it is, but I have no other supporting components to really justify having it.
There're recipes for fitting S60R and Porsche 993TT and 928GTS calipers with 302mm rotors on Volvospeed.com You gotta go with a 17" wheel though, and possibly spacers too.