Gland nut. BINGO!
 

The gland nut? `Bingo!` Today afternoon. Car`s lifted. Shock insert does have substantial play inside the tube. Nut looks *bad*, huge amount of cruel rust visible; sprayed it every 5 mins, 3 times (WD40). Then started tightening the nut (went pretty well) which resulted a full turn (360degrees) then it stopped. I went backwards a quarter of a full turn (70-90degrees) in order to start over the tightening procedure from that point again... Sprayed again, started tightening... and here I expected the nut to go another full turn (which sounds a lot, I know, but half of the threaded parts of it was still out) BUT instead of that it went just a little, less then that quarter turn I already had before ... and THEN suddenly the whole thing shot itself out of the tube so the nut got completely free/loose, strut insert `bang`... went UP, the lifted wheel DOWN all the way, wow I should have it on camera including my face expression there. I would never think that this would happen. (loose nut+rust=fail) Luckily it did not when I got the whole assembly out a few days ago.... Now my susp is crippled until I get parts...:) What caused this, idk, but now I might have a strut housing that probably has no inner thread whatsoever (???)(inspection tomorrow) OR if get lucky again, it will take a new insert with a new gland nut securely. I have to get the whole thing out again (but this time I am not sure whether or not it should be done using the spring compressor while the shock is still in the car.)
Well, every day is a new day in Volvo-life... a new issue and some adrenalin + nighttime parts-hunting... :)

Hydraulic fluid isn't really compressible. I bet there is some in the bottom of that tube.
The nuts usually sit a couple threads above flush.
They clamp the top of the cartridge by the bottom of the nut, and there has to be thread enough for them to for sure reach.

I bet the cartridge is as fine as it was before. Seemed good when I drove it:D