XC70 Check Engine Light and Exhaust Smell

That's definitely pointing towards an exhaust issue. A faulty lambda sensor could be the cause, but it's not the only possibility. An exhaust leak before the catalytic converter will definitely cause rough running and trigger the check engine light. The smell is a dead giveaway! Have you noticed any change in fuel economy? Are you sure it's an exhaust leak and not a DEF fluid leak if your model uses it? Have you checked for any obvious damage to the catalytic converter itself?

Fuel economy seems normal, no DEF fluid on this model. Visually, the catalytic converter looks fine. If the cat isn't damaged, and DEF is not a factor, is a bad oxygen sensor the most likely issue, or are there other sensors involved in exhaust treatment on this engine?

Given those factors, a failing oxygen sensor is a strong contender. There are other sensors involved, but a faulty O2 sensor will absolutely cause the symptoms you're describing. However, without proper diagnostic equipment, you're just guessing. Get it to a workshop; they can read the error codes and pinpoint the problem for sure. Save yourself some time and money by not throwing parts at it. It could also be something completely different!

Thanks for the advice. Took it to a shop; confirmed defective lambda sensor. Repair cost 375€. Replacing it resolved the issues.