I cannot tell you what the problem is but the Manual shutoff is supposed to work reguardless of Vacuum issues.

I would get a mirror and take a good look at the shutoff lever on the IP to see that it is not loose and that the shaft the lever is supposed to turn is moving with the lever.

I do not know if there is anything inside of the Vacuum shutoff that goes bad that would prevent you from using the manual shutoff.
Just to check it you might want to use one of those "Mighty Vac" type hand vacuum pumps to check the Vavuum Shutoff to see if it holds vacuum.
Removing the Vacuum Shutoff and seeing if you can shutoff the engine with the Manual Shutoff might tell you if it is the Vacuum Shutoff causing the problem. However, I have read you need to be very carful when you put it back into the IP (read some threads on it).

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84 300D, 82 Volvo 244Gl Diesel