Phil says: Yes, you should be able to see the cable turn. I would disconnect the cable at the transmission and see if it's broken at that end. It hooks up just the same as on the speedo end, only a lot dirtier... it's at the very rear of the trans above the rear support member, but you'll be able to reach it. Oil will not pour from the tranny when you unscrew the fitting, don't worry.

As for something going wrong inside the tranny, the only possible thing would be the output gear that drives the cable -- the one it plugs into. This is some sort of plastic, as I recall. It can also be replaced without pulling the tranny -- you might have to remove the support member, though. Take your old one in to Volvo for replacement -- they come with varying numbers of teeth on them, so you'll want to match the one you have.

Problem resolved: Output gear had two teeth left and was replaced.