This is simply an informational thread on setting up my XC90 for towing and the experience so far. When I was looking for answers I wasn't able to find much information on towing with the FWD 2.5T version of the XC90.

Vehicle:
2005 XC90 / 2.5T / FWD / 230K miles (yeah, you read that right, lol)

Being Towed:
2003 Baja 20' Outlaw on a single axle Eagle trailer

XC90 Towing Capacity:
4,000 lbs with the FWD (AWD drive version allows for 5,000 lbs)
NOTE: towing capacity dependent on a trailer WITH brakes

Boat & Trailer Weight:
3,800 lbs total
Boat = 3,000 lbs / Trailer = 800 lbs

Brakes:
Trailer has surge disc brakes

Hitch:
Draw-Tite 75152
5,000 lb max capacity
500 lb max tongue weight

Wiring:
Curt 56045
4-Flat connector

Setup:
Adding the Curt wiring was very easy. Everything literally just plugs in. No splicing was required which I was happy about. The hardest part was finding a place for the ground wire. I ended up just drilling a small hole and attaching it to the frame of the vehicle by the tail lights with the supplied self tapping screw. Make sure to scrape the paint off the metal to ensure a good ground connection. The Draw-Tite hitch was also very easy. Other than being heavy to maneuver, everything simply bolts on. You have to remove the exhaust bracket on the drivers side and the tow hook on the passenger side. You leave the tow hook off since you now have a hitch to use if you get stuck. Both the wiring and hitch have detailed, XC90 specific instructions.
City Driving:
The 2.5T isn't a huge motor but it definitely gets the job done. Taking off from a stop takes longer as you'd expect. Planning for hills when possible avoids undue labor on the engine. I have to admit I really baby it while towing (c'mon, she's got a lot of miles on her). I manually shift the transmission when it makes sense to do so. Otherwise I simply leave it in "D". Overall I'm more worried about clipping curbs with the trailer than the XC90's ability to move the load.

Highway Driving:
Again, getting up to speed takes time as expected. However running on the highway at 65-70mph is no issue whatsoever. The vehicle seems very stable and happy to chug along.

MPG:
Not as bad as I thought. With a mix of city and highway driving while towing I've averaged 14-16 mpg. Normally I average about 20 mpg not towing.

Stopping:
With the surge disc brakes it's really not a problem. You obviously have to plan ahead and leave more time and space to stop. However there isn't an issue with stopping the load when towing.

Boat Launch:
My biggest concern was pulling the boat up out of the water at the launch. So far it hasn't been an issue at all. The wheels might slip a bit on wet concrete but overall things have been fine. I do use nice launches with ribbed concrete to help with traction. A gravel launch would be a different story. That's when AWD would come in very handy. However, so far the FWD has done very well.

Overall:
I've very happy with the XC90's performance. I'll admit, it's close to the max according to the manufacturer. However real world experience has proven it really does tow like a champ. Slow to get moving but once up to speed things are just fine. Pulling power at the boat launch is good. Hills can be an issue but a simple downshift seems to fix that issue. Having a dedicated towing vehicle would be great but I'm not excited about having to buy, register, plate, insure, and maintain another vehicle just for towing. For now the XC90 will do just fine ('til I get a bigger boat, lol).