From someone who has sold used Volvos for 20 years, take my word here and be happy with the 200 HP that your 2.5 turbo makes. It is MORE than adequate for the car.

The AWD model is more than a "conversion". The entire vehicle is built to accommodate the AWD system including computer system and wiring harness.

Keep it stock and enjoy.

 

yes you can add more HP - think of an engine as an air pump. The easiest way is to shop for an ECU tune to gain a more agressive boost curve. Next is to add a bigger downpipe to help get air out of the engine. That's about it keeping it simple. Those two can add 40-50 HP and gives the benefit of having a reason to only buy 93 octane. After that its the law of diminishing return on your investment. Turbochargers themselves have a pumping capacity so that's another area high performance engines swap out. Next you have to deal with gettting more fuel into the engine so you have upgrade the injectors. Now you need to deal with the extra heat so your off getting a larger intercooler and oil cooler. Now that you're pushing 300+ HP, you probably want to save up for your first transmission rebuild (unless you happen to own a manual). Plus it'd be time to invest in suspension and brake upgrades to help keep you wheels side down...

 

Before you do anything, do the maintenance required to reach "Stage 0." Plan on replacing all of your rubber vacuum hoses, drive belts, and radiator hoses. (Silicone lasts forever)
Here are some basic initial upgrades that will make your P2 S60 more fun to drive...

Handling:
- Sway bars (Bigger IS better. Less body roll)
- Poly engine/transmission mounts (Snappier handling but more vibrations)
- Strut braces (Less flex=better cornering)
- Stiffer shocks (The factory "luxury" ride is pretty soft)
Engine:
- Air intake upgrade (Not a 'cold air' cone filter swap, but a larger capacity pipe to the turbo)
- ECU tune ($$$... but the best way to get more power)
- 3" Performance exhaust (The factory setup is 2.25" with a restrictive cat & muffler)
- TCV upgrade (Smoother power delivery)
Braking:
- Do nothing. Just replace any worn parts with new factory parts. S60's have great brakes to begin with. (Upgraded rotors, calipers and pads seem to be more trouble than they are worth)