Hi, Barry - - -
Perhaps some added experimentation is in order. The following relates to a '98 V70XC, but may well apply to your 850.
We're dealing with a 3-position switch here:
Vertical slot (within the access hole) - Fully automatic with ignition, headlights and "parking" lights on (factory setting).
Diagonal (upper left to lower right) - as above, but when manual knob is in position for parking lights, headlights are off.
Diagonal (upper right to lower left) - all lights off; controlled by manual knob only.
On our '02 S60AWD, of course, the computer has taken over everything short of steering the car - see your Dealer for reprogramming! A word of warning (or excuse) is that a lot of Delers won't touch factory-set, "safety" settings, so we continue to wait for a truth-telling-time when Volvo will be forced to release more info and give at least those with computers access to this and other resets.
bob noble Reno, NV, USA