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If Volvo customer service deny there is a recall it is possibly something that has been misreported or misunderstood or perhaps it doesn't apply to vehicles in your country or region.
If in doubt I suggest you contact a motoring forum or a motoring organisation or any big newspaper or magazine with interests in consumer rights and/or motoring.
This will not cause the problem even if filled with engine oil ,no you have another problem here like corrosion or a flexible brake pipe with a internal collapse ,maybe even a faulty master cylinder which is a tandem type .So have a good look or enlist the services of a local mechanic .
Are you sure the gauge is reading correct? You also didn't mention how many miles the vehicle has. If it's less than 150k I would doubt the motor it worn out, (excessive bearing clearance would cause poor oil pressure even with high volume pump). Chevy's have a lot of issues in the dash with the motors that make the individual gauges work. I would check the oil pressure with a manual gauge. If you don't have the skills to do this yourself, a qualified shop wouldn't charge much to do it. If you find that the gauge is incorrect, there is a guy in MN that rebuilds the instrument cluster for $65 with all new stepper motors (the motors that work the gauges) and replacement of all the bulbs, plus gives it a lifetime guarantee. www.speedometerrepairguy.com.
I can tell you that it sounds like someone is trying to take you for a ride.. I've been a mechanic for 28 years. And I've never heard of o rings going bad on a motor that only has 56000 miles. Change the oil filter again.. make sure that it's not a fram.. gram filters have been known to cause your oil pressure light come on. Hope this helps you.
To repair your cluster you can google a company called XeMoDex, or you can find a *same year* S80 in the junk yard and take the cluster from that and hope it's ok.
The thing is that the car will generally show whatever the highest mileage is - whether it's in your car's computer or in the new cluster. If your car has 100K miles and the junk yard cluster has 150K miles, it will show 150K miles.
The best oil for Audi 1.9 TDI is CASTROL 0W30 SLX Longlife II (TDI Pump Nozzle) VW Norm 506.01 . This oil is issued by Castrol special for TDI - Pumpe Duse (Pump Nozzle) engine as longlife oil (50,000 km service interval, or two years). Also a normal service oil (15,000 kmservice interval, or one year) is Castrol TXT 5W40, and Castrol EDGE 5W30, for TDI Pump Nozzle engines, VW Norm 505.01.