Well, it all worked out fine in the end
My mechanic put me on to a very nice man who was a Mechanic/foreman for the local Volvo dealer between 81 and 96, he trained on these engines, and has worked on "hundreds of them", and has all the special tools needed. He replaced the ip belt, and did the valve and pump timing. The car is now going better, and is less smokey than ever, the ip timing must have been slightly out since I got the car. He also gave me a few tips on maintaining the engine, like cleaning out the egr valve, and advised me to fix my engine temperature gauge which hasn't been working for a few years (I've just been checking the coolant level every morning).
I read that usually it's not the temperature sender that is the problem, but the circuitry in the dash, which is a nightmare to take out, so I've installed one of those Australian made temperature gauge/alarms, where the sensor is just bolted onto the outside of the cylinder head, and the gauge gives a digital readout, and you set the alarm to sound when the temperature goes a few degrees above normal working temperature.
I also purchased a coolant expansion tank from a breaker which has a float switch and sensor fitted to it ( I think it's from a 960) - it says on it the part number is 9142001, and the part number for the tank without the float switch is 9142002. So when the expansion tank is empty, the circuit is closed. So I'm going to fit it, and wire it up to an alarm and warning light, so now I will have triple protection: high engine temperature alarm, low coolant alarm, and daily checking of the coolant (when I plug my engine pre-heater in)