if its anything like other volvos, the gear shift is translated into 2 cables which connect to levers at the gearbox end, It is conceivable that one of the linkages has come off at one end or the other, I have had this happen on a v70, this leaves two gears selectable but the side movement inoperative, its either that or something has slipped into the mechanism jamming it. engine light might possibly be something totally unrelated