How to Reset the Radio (from http://www.matthewsvolvosite.com/radio.php):

1)  When the radio displays CODE, you may enter the code using the
preset radio station buttons

2)  For instance, his number is 1615, so when he gets the CODE on the
radio's display, he presses the radio preset button 1, then the radio
preset button 6, then the radio preset button 1, then the radio preset
button 5.

3)  If your radio says OFF, leave the ignition on in the first position
for 2 1/2 to 3 hours in order for it to display CODE.

The code is keyed to a serial number on the radio. Your dealer can get
you the correct code.  If the correct code doesn't work, I have heard
that if you put the whole unit in a freezer for 24 hours (suitabley
protected in a plastic bag), then you may be able to reset using any 4
digits you chose. I have never tried this myself.

I have an 850 too, 3 thoughts

1)    I hope someone else can help you solve this, if not:
2)    I have seen the upgrade radio with CD on E-bay for less the 150
3)    You can look at www.crutchfield.com for a new head end--it will not
look as nice, but they             do have a insert to perfectly fill the
hole and mount the new unit--a few weeks ago they had             some great
deals on discontinued but new fully warranted blaupunct units.