I done broke this! what did I break? It goes in the hole to the bottom right of the sensor with the yellow wire. It is connected to a brown wire.

 

Gauge temperature sensor.

 

Sure looks like an oil pressure sender to me...but it belongs on the other side of the motor...

 

I'm pretty sure that's a temp gauge sender. I broke it also on my 1993 240 and had to replace it. You should be able to pick one up at your local parts store pretty cheaply.

 

Here's pictures of replacement senders for an 83 240 w/ LH2.0 FI.
The oil sender...

The sender for the temp gauge...

The weird thing is the op sender mounts on the other side by the oil filter and alternator. The gauge sender is, I believe, the yellow wired sender by cylinder 2 while the temp sensor for LH is located by cylinder 3. I don't know what would be mounted lower and to the right...

 

It might sound a little careless but, single pole switch that is grounded to close. How about grounding the wire and then ignition on and look at your instruments..... Of course disable ignition and fuel pump.

 

Might be this: Volvo Knock Sensor (240 244 242 245) Genuine Volvo 1317296 | FCP Euro

 

Looks to be this part, thanks! wow that is an expensive (screw)!

 

scrounge one off another LH 2.0/2.2 car LH2.4 uses a different one.

I did think the yellow wire was for the dashboard temperature gauge sensor, which is separate from the ECT engine temp sensor used by the ICU and ECU. all three of those (knock, dash temp, and ECT) are under the intake manifold, while the oil pressure sensor is near the oil filter on the other side. (digs up his 240 greenbooks...)

oof. no 83 on this disk, just <= 1980 and >= 1984... ok, i'll look at the 84 book....

hmm, I don't see a knock sensor at all on the 84 diagrams? the temp sensor on the block has a blue and black (ground) wire.

the yellow wire on an 84 is definitely the dashboard engine temperature gauge sensor which is shown as having the long thin end, like the above pictures suggest.

I guess its possible someone put the wrong sensor in previously... or plugged the wrong wire into the wrong place.