Feels like auto is in winter mode taking off, then shifts to first
 

Assuming this is the same transmission as I have would a bad or failing/sticking solenoid cause a condition where sometimes the car starts from a stop as though it was in winter mode? If I slowly come to a stop some times my car acts like it is trying to start off in second gear but after it gets a few revs it suddenly down shifts into first and takes off as normal. This is not all the time but only once in a while.

Fluid is clean (pink) and full ?? Have you tried an additive in case it is something in the valve body that is hanging up ? If not you might want to try a bottle of Lucas transmission additive. There are two or three types and off hand I can't remember which one would be best. Have to read the labels and look for the one that says cleans and removes varnish.

Is the "up" arrow flashing ??

Have you tried rowing through all the gears park to first and back again a few times to see if it might clear the problem (can sometimes clean the neutral safety switch or PNP switch in Volvospeak).

Not sure is a sticking solenoid would make it start in second at times and drop to first but it might due to high pressure as you spin the converter and front pump faster. The rise in pressure might be pushing the solenoid back to where it should be but I'd sure wait for someone else to agree or disagree before I took out the solenoid.

Fluid looks good and no burnt smell.
No problem with the up arrow.
Have not tried rowing through the gears but the car is a daily driver so it see plenty of shifting.

"Not sure is a sticking solenoid would make it start in second at times and drop to first but it might due to high pressure as you spin the converter and front pump faster. The rise in pressure might be pushing the solenoid back to where it should be but I'd sure wait for someone else to agree or disagree before I took out the solenoid."
This is kind of what I was thinking but I will try some additive first to see if that frees something up.

I understand you on the daily driver but it's the fact that you're going all the way from one extreme to the other. A normal daily driver like yours or mine rarely sees D1 or D2. Please take the time to shift it through the full range of stops a couple times just to make me happy. ;)

I will do that and report back. The other thing I thought of is if one of the brakes is hanging up once in a while and then suddenly releasing but it never feels like it is pulling to one side it feels a little more like the tranny. My Jeep used to have a rear brake that would stick sometimes at a stop and then drag that wheel for a moment before releasing and this does not feel quite like that.

If I put in the transmission additive I will need to drain some ATF to make room for it so it would probably make sense to drain all that will come out with a simple drain down. What ATF do I use to replace it? The owners manual says Dexron IIE or Mercon, I thought those were replaced by something.

Depending on the owners manual it may call for DexII or DexIII. DexII was replaced by DexIII and DexIII was replaced by Dex/Merc.

If I just pull the drain plug on the tranny how much fluid can I expect to drain out? My Haynes manual says 8 quarts but I think that is draining the torque converter. I have found on other cars that you don't get more than 2 or 3 quarts on a simple drain down.

Around three, less than four for sure.

Update
I finally got a chance to drain some fluid and add the trans fix and some fresh fluid. I'll give and update after a few days.

Update
After a week of having the Lucas Trans Fix in the tranny it is a lot better. The problem has not completely gone away but is a lot less frequent and a lot less harsh when it down shifts at start up. I will give another update in a week.