1996 Volvo 850 2.5 Erratic Idle, Backfire, Lack Power

[VolvoManWA]

Hi All,
Hopefully someone can give some advise. I live in the South West, no Volvo dealership for 200km. Bought a 1996 850 2.5 wagon (141,000km)which was running rough but thought I could have a go and fix it up. That was three years ago and since then it has been sitting in the shed collecting dust (little spare time & money). My 1994 T5 850 wagon that was my regular driver did the auto trans last week so have been trying to get the 1996 up & running for the past week.
Did a compression check and cylinders range from 195 cyl#5 to 240 lbs/in2 for remaining cyl's. Checked the timing belt and marks all line up correctly. Plugs are good condition and spark is strong. Replaced the positive battery cable as it was getting red hot & new battery terminals on a new battery. Fixed up several vacuum lines that were not attached or perished connections. Filled tank with premium 98 octane fuel. Fuel filter looks relatively new.
Took many attempts to get the car finally running and the only way I could get it started and keep it running was to clamp the fuel return line from the fuel pressure regulator. Once running it sounds like an old chaff cutter, spluttering, missing and backfiring (popping) through the aircleaner box.
It stalled everytime I put it into drive so had to wind the accelerator cable screw back to keep the revs up to be able to drive. When trying to start it will also rev to 3000/3500 rpm then drop back and stall.
On the road it is a pig to drive on takeoff with much chugging and missing. Once upto speed 60km/hr it is reasonably smooth but lacks power. Can hear the popping through the aircleaner regularly.
The lambda(fault) light is constantly lit but the code reader I have comes up with NIL codes. I will have to ring around this week to see if anyone in my local area has a code reader that will work for this model.
Any help would be appreciated,
Cheers Dean

[Johnno]

Sorry, I've got no idea what it might be either, but you could try this other Volvo forum for some advice - OzHotVolvo's (it's a Yahoo email group with a wealth of knowledge, but located on east coast).
When you get it sorted, please post back here and help build our local knowledge base.