[GrahamBrown1]

Simple things to check, how much play is there in the prop shaft, the garage suspected transfer case or what volvo call the angle gear. There is a splined coupling that connects the angle gear to the gearbox. These were prone to wear in older cars. If you can turn the prop whilst under the car this was tell tale the coupling was knackerd. Be worth a check. Also check prop shaft bearing and joints. The burning rubber smell is a little odd. You could check the haldex oil and filter also.