I have owned two of this generation of the Volvo XC70. I upgraded from a 2001 to a 2007 to gain electronic stability control, a more powerful and cleaner running engine, and the Haldex AWD. The only reliability problem I have had in the 11 years since my first XC70 was delivered was a bad transmission in the 01. It covered by warranty, and at no point was I unable to drive the vehicle - even once it became obvious the transmission was going (it simply became loud and clunky).
The best thing about this car is its character. It has all of the comfort and security you would expect out of a Volvo wagon, but is built so that the occasional rocky dirt road, snow storm, or runaway shopping car won't ruin your day. In addition, the 2.5L Turbocharged engine makes it a car that is both fun to drive and easy to merge onto a highway with. The large, flat cargo area behind the rear seats combined with the steel cargo barrier accessory also make this an ideal road tripper for dog owners (the rear seat bottoms can be folded forward when the dog is in the back and secured with a tether, leaving plenty of room for your bags even if your pooch takes up the whole cargo area!).
I would have liked if a more powerful engine was available on the 2001 - 2007 models, especially something as nice as the 325HP available on the 2012 XC70 T6 with Polestar Performance Package.
I also wish the fuel economy was a bit better. I generally get 19 - 22 MPG depending on the time of year with a strong mix of city and highway driving.