There are 5 screws that hold in the plastic cover over the windshield wipermotor well. Take them out as well as the windshield wiper arms and you will find a filter setup at the right hand side of the car. That needs to get replaced. While you are at it vacume out all the crudola around inside the wipermotor well and inside the fan inlet. Should help.
My 1997 854T5 does not have a pollen filter.
I know the smell you are talking about. The smell is due to water in the evap housing. Volvo sells a de-odorizer to coat the Evap for that reason.
I believe the part # is 1161570
Check under the filter in the windshield wiper well it is on the top right hand side of the well. When you remove the windshield wiper cover you will see it there. Take it off and look inside the well that the fresh air enters. I had the same problem with my car as you do when I got it. If that filter ( pollen or other wise ) gets clogged that will cause the mildew build up in the HVAC system.