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Q:

abs brake service required on 2001 Volvo V70

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Displays on dash. Brakes checked OK. Mechanic thinks it might be a bad sensor but doesn't know how the cause.
(1) Answer
This a very common problem on this car so I'm guessing this mechanic doesn't have much experience working on Volvo's? Just a guess.
The issue is likely the ABS control Module, but if you can tell me the codes they pulled from the ABS module it will help, since there can be other possible causes.
Inform your mechanic that the ABS module can be rebuilt, this will save you quite a lot of cash, see this site for details: http://bit.ly/8z7rcm
good luck!