Here are the vehicle symptoms: slow coolant loss over time, yellow waxy sludge buildup on radiator and coolant temp. sending unit, no reading on temp. gauge, and the heat/AC fan doesn't work.

I noticed the issue when I checked the coolant reservoir and it was totally empty.

Just trying to figure out what went wrong and how to start fixing this. Any help is greatly appreciated ! Below are some pics...

 

I can't open the images.
By your description, you may have a slow internal head gasket leak. Take a compression test, or leak down test to find out more. Avoid overheating at all costs, if it hasn't happened already, well, even if it has happened already...

 

the heater/ac fan is completely unrelated to the cooling system. rather a big pain to replace that fan on 240s, its buried under the center of the dashboard.

there's two seperate coolant temperature sensors, a single one thats used strictly for the dashboard temperature gauge, and a dual one which is used for the ECU and ICU to adjust engine operating conditions according to how warmed up it is. both of these are beneath the intake manifold, screwed into the head.

 

The corroded one leads to the dash temp. gauge. I'll go ahead and inspect the dual gauge too. I think I may end up overhauling the whole cooling system. I've also read that it's important to use an antifreeze with no phosphorus like the Volvo coolant. Any thoughts on this? Thanks.

 

I've been using Zerex G05 in my volvos, also in a 91 mercedes 300e, without any problems.

 

All four cylinders are holding compression (140 - 150 psi) and upon further inspection there's no oil in my coolant and vice versa so the issue seems isolated to the cooling system. Thanks for your input.