From what you are stating here it sounds as if the brake master
cylinder is starting to go bad you need to have this corrected soon
either by yourself or a local Volvo repair shop /or dealer

Normally the booster doesn't cause the pedal to drop.

Besides the obvious master cylinder suspicion, it can be sticking slide pins
in the front calipers - especially if the low pedal height includes a pull
to one side when braking. If it pulls to the right the problem is in the
left caliper and vice-versa. In my 85 765T I had my daughter gradually
depress the pedal while I tried to turn the wheels one at a time. The right
front still turned by hand when the pedal was all the way down! I had to
drive the slide pin out with a mallet. If this is the problem, be sure to
have both front calipers cleaned and lubed. The rear doesn't use floating
calipers on my model; I'm assuming yours is the same. Otherwise the rear
calipers are under the same suspicion.

Mike

While you are at it, flush and change the brake fluid as it sounds as if it
has started to become contaminated with water. As the fluid is Hygroscopic
(ie absorbs moisture) it should be changed every two years (Volvo
recommendation).

Cheers, Peter.