If you are going to use a new coil why not remove all the connections to the old ignition switch (they will no longer serve any purpose) and connect up the new coil as was done in cars that were originally fitted with a steering lock.
For the electrical connections to the steering lock, see:
http://www.volvoforums.org.uk/showthread.php?t=266985
post #10
The red wire (switched +ve) goes to one of the two internally bridged terminals of the fuse box. The other one of the bridged terminals goes to the +ve terminal of the coil via a brown wire. Your car will have the red wire but maybe not the brown one - easy to add. Note: the connection to the coil comes from the
un-fused side of the fuse box, so power to the coil is not fused.
I have attached a copy of my car’s circuit diagram and have coloured the wires in question. Better copies of the diagram can be got off the web.
(The wire marked ‘*’ is confusing because the left hand end of it doesn’t go anywhere. It is for a rev counter, which my car doesn’t have. Volvo deleted the rev counter from the diagram, but left part of the wire in place.)