My $.02 worth. If you are using this STRICTLY as around town, NO long drives, and it is in good shape interior and exterior why not just do the minimum as suggested, and drive it 'till it goes clunk? Then pay to have it towed to the junk yard and thank the BIL for years of good help?
A new CAT will come with a heat shield already, a serpentine belt is about 50 bucks, a half axle will be the expensive part, and even if you buy a used car, in all likelyhood you will need tires for that anyway!
It does no good to love a car that won’t love you back. Start looking for a newer car, Volvos, especially those neglected ones, do NOT age well.
Unless you buy a new or late model used car with very low mileage you may end up with something that needs just as much money put into it for repairs as the Volvo plus you’ll probably have car payments. I’m like you I hate to see a car go that’s still got lots of useful life left in it. When I bought a new car in '97 I kept my '88 Ford Escort with 250K miles on it for a daily driver, it’s now got 517K+ and I’m still making necessary repairs to keep it safe and road worthy, but I do my own work. I also replace most parts with parts from Auto Zone that carry a lifetime warranty, so if they ever go out again all I have to do is return them for new ones (this may be an option for the axles in the Volvo). All the parts you have listed that are in need of repair are parts that I’d expect to need replacing on a car with 250K miles on it with the exception of the catalytic converter. If you buy another car it may not need tires on it when you buy it, but chances are they will not be new so you’re only postponing a new set instead of buying them now. Even if you decide to buy another car maybe putting the minimal amount of money in the Volvo to keep it safe and road worthy would be an option and use it for a daily driver. By keeping my '88 Escort as a daily driver I’ve kept the mileage very low on the new car I bought in '97, it currently has 32K miles on it and is basically used when going on trips of 200+ miles. We just moved from NC to KY about 9 months ago and when it came time to move my '88 Escort I drove it from NC to KY about a 500 mile trip, I didn’t have any problems and didn’t expect to, because even though I don’t make cosmetic repairs I make necessary repairs that pertain to vehicle operation. At the cost of parts and labor today $1500. is not a lot of money to put into repairs especially when you’re paying someone else to do the work. I recently replaced the timing belt/water pump, transmission shift cable and oxygen sensor on my son’s car for him, the total cost with me doing the work was under $100. by using a used shift cable and shopping for the best price on the other parts, but if he’d paid a mechanic to do this work the costs would have probably been $800.-$1000., and there wasn’t any problem that was worthy of discarding the car. Just my $ .02 worth.