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).
After thinking about it for a long time, I narrowed down my choice of cars to the XC70, Honda Element and Outback. Drove all 3 back to back. Bought the 2007 XC70 with 30k miles for a great price, especially with a trade-in of my 16 year old Toyota 4-runner! I thought there was not comparison between the Volvo and the Outback....I know the Outback has a good reputation, but the XC70 has blown me away (imagine moving from a 1993 4-runner to a 2007 XC70). It is such a joy to drive, and although I can't compare it to other cars in its class, I think it handles and rides incredibly. It is so solid and quiet and the interior is like sitting in your favorite leather chair.
My current 2007 XC70 is my second; the first was 2004. All prior model year problems (e.g. transmission) seem to have been fixed on the 2005-2007 model years and '07 was the last year before Ford made Volvo cost reduce the vehicle and substitute the problematic Mitsubishi OEM T6 engine for Volvo's bulletproof 2.5T.
I now have nearly 150k miles on this car and my only significant repairs have been (a) timing belt and water pump at 110k as specified, (b) lower control arms at 120k, (c) brake disks at 130k, and steering wheel position sensor "clock spring" just done at 148k. Seats still look practically new. The chassis is tight and free of rattles. Even the original struts still doing well, although I've thought about replacing them to tighten up the ride quality a bit. All in all, a very solid and well built vehicle - very comfortable, big storage in back, and tight if not razor sharp European style handling. I particularly admire the 2.5T engine. Torque peak at 1,900 rpm is right at 55mph where you need it for passing. Light boost turbo maintains power at altitude, yet runs nicely on US regular 87 octane gas - unlike Mercedes, Audi, etc.
Good sound system, comfortable seats, intuitive controls, great visibility, sure handling, and higher ride height that makes for easier in/out for us older guys plus eliminates annoying scrapes in front while parking (and you don't plow snow with the front bumper unless it's well over six inches.
My only niggle with this vehicle is road noise which can be an issue with most aggressive tread patterns. I've finally settled in happily with Pirelli's P7 AS plus, Tirerack's number one rated Grand Touring tire, which is as quiet as they come with crisp handling and commendable grip in all conditions.
Unfortunately, I don't see myself buying a newer Volvo product. Replacement candidates include the Cadillac CTS sport wagon (comparably priced but less comfortable seats, high revving engine) or Mercedes E350 wagon (premium fuel, funny controls, expensive) or perhaps Lexus RX if you like SUVs (also expensive). So, not for lack of looking but certainly for lack of a better alternative, looks like I'll be keeping this good old girl and treating her well for a good while longer.
One minor issue remains - the fuel tank straddles the hump necessary for AWD - which means there are two low points in the tank. If the tube linking the two low points in the tank together gets clogged, the car can lose fuel pressure and stall when the indicator still reads 1/4 tank. Mine is partially clogged, so only happens occasionally on long highway trips with no stops. I've spoken with other owners who have to fill up before theirs reads 1/4 tank even in the city.
Finally, if you read the owner blogs Dealers are often referred to as "the Stealership". I've found them capable but very expensive. Could be worse if you have a Mercedes or Audi. Another reason to not buy a new one - along with Volvo's new Chinese ownership (?).