The 123 is still basically a switch, the same as the original mechanical ones. In good original condition, i.e. no or virtually no wear in the mechanisms, the original will work the same as the 123. Some 123 versions may have some circuitry that can vary timing in ways the the mechanical one can't but for this post we will stick to basics. Distributer bearings/bushes wear and can cause unequal contact breaker gaps which can vary both the timing and power of the spark due to the same unequal gaps varying the amount of time the coil has to restore its power. Both of these problems can result in poor ignition performance at high revs. The cam on the shaft can wear giving less points opening and dwell. Poor quality points with soft rubbing blocks can allow the points gap to quickly reduce below optimum, giving the same problems as above. Points springs can be poor on cheap points allowing points bounce at higher revs. Points can be regularly adjusted or replaced but the very important advance and retard mechanism is rarely looked at. After, say, 50k miles the holes in the weights will have worn and tend to move erratically. Springs can also get weak. Unfortunately it is hard to get the exact replacements for these. There are some that fit but the weights are just that and need to be correct, the same is true with the springs. There are several shims and seals on the shaft which help it maintain it's vertical travel. Some will be missing, actually worn away to nothing and not there at all.
Do any of the above areas of wear affect how the engine works? Of course it has to, but most engines and their owners will soldier on, without being aware that things could be better. If you could order a new Bosch distributor from your Volvo dealer or a main Bosch agent that would be a good plan. Unfortunately both will say, sorry NLA.
Pause for a fanfare! 123 distributors are available to give you the same performance as your original unit. Some new owners will say they have noticed improvements in starting and smooth idling. Somewhat fewer will say that performance is transformed with acceleration, top speed, mpg etc noticeably better. There should be improvements but that's when you are comparing it to the performance of your old unit and the way all of the worn and sub par parts have been working, or not, together. 123 appear to have addressed a lot of the originals weak spots and as long as the electronics are bomb proof all should be good for many miles. The jury is probably still out on the electronic reliability as there are still a few failures. Anyone who has had faulty electronic ignition on a "modern" car will say that can happen.
Bottom line, if your distributor is indeed clapped out and can afford a 123, buy one, fit it and be happy. However, if you are handy, pull your old unit apart and inspect it carefully. If obviously bad there are other much better ones sitting in peoples spares boxes just waiting to be refreshed a bit and used. If the main shaft bushings show no play then they can probably be rebuilt without much of a problem to a usable standard.. Beware worn weights, they can be rebushed and if done carefully there should be no effect on how they work centrifugally. Tuning the weight is how advance curves are changed and many racers will try mods with them. Useless without a machine but we won't go there.
