I had a Volvo 850 2litre 20 valve M registered that I drove and used as a tow car for 8 years, plenty of power and flexibility providing I was prepared to use the gears, very stable and ultra reliable ( I replaced tyres, and one ball joint in the 8 years I had it). For anyone looking for something like that I would look for N registerd or later when the aircon became fitted as standar and I would go for the 2.5 engine rather than the 2.0. There are lots of 850's and S60's for absolutely silly money, you should not need to spend more than £1000 to get something really worthwhile. Probably the 850 estate or the early V70's would be better for a family but I was perfectly happy with the saloon, one advantage of the saloon is that everything is shut away in the boot and there is no chance of anything moving forward.
The only reason I got rid of the Volvo was that I wanted to have a car with with aircon, I got fed up of arriving feeling hot and sticky, mind you it hasn't been as hot since I got rid of it. You can expect 29 or 30mpg on a trip, 25mpg about town and 18 to 20 towing from them.
I've no idea how much you want to spend, but if it helps, I just bought my 2003 V70 D5S estate for £3600, love it so far, getting over 50mpg on the motorway. I haven't tried towing the van yet, but I'm sure it will do an excellent job.
I bumped into someone who had the (I think) 1989 equivalent, still going strong and not a spot of rust on it.
My late brother had a V90/960. He bought it new in 1998 and paid something like £30k for it. Top of the range CDmodel automatic tow bar, air con all singing and all dancing. When I came to sell it in 2005 I only got £3500 for it, it only had 720000 miles on the clock. Great car even better tow car but VERY, VERY thirsty. 18mpg round town and 22mpg on a run. If you do a lot of miles an ideal car to do an LPG conversion on.
My son bought an ex met. police Volvo V70 T5 for £4k. The car was a 2002 and had covered 140k in 3 years but with a full and detailed service history. He does about 25k a year and so did an LPG conversion and now gets the equivalent (when costing the gas price to petrol price) of 40+mpg but still with the performance.
My own Volvo was a V70Tdi P reg. 1996/7 top of the range CD model. I only sold it in March 2008 as I changed my caravan to a motorhome and I only used it for towing the van.I have a 2008 V50 1.6d for my daily use now. The V70 Tdi was the best car I have ever owned, the trip computer showed that over the last 6000miles of my use i averaged 42.3mpg and that was mainly towing a1500kg van. On a solo trip to the South of France using toll motorways I averaged over 60mpg.
The only problem I encountered with my V70 was the self leveling mechanism when I first hooked on the van. I'm not technically minded, but I understand the system works on pneumatics, that is the first few bumps pumps up the system and so highers the back end, however for the first mile it was always hairy looking out for bumps that would bottom out the tow ball and jockey wheel/ I don't know if later models use electronic self leveling. The V70 is front wheel drive, I only got stuck once in a wet camp site with the wheels spinning.
I sold the car to a friend of my sons for £2500 which was the trade price in March 2008 with 123k on the clock and full service history. It is still going well with no problems.
Finally if you do go for a Volvo find a local specialist service garage don't go anywhere near a main dealer they charge the earth for service.