Same issue I have with my personal outlook account. Other peeps on the forum have everything setup and working with MS emails so you might want to review those threads and see how they got theirs working.
Just to note, I am 100% anti-windows. The only reason I use MS products at all is to test things like this. Their support is far from good and not helpful at all. Their documentation is horrendous and out of date all the time. So I tend to steer clear of windows if at all possible. I really don't know what's going on without talking to MS support but they haven't provided any sort of help in 2+ weeks so I'm at a loss here. We are going to create an official MS account so hopefully we'll be in a better position to test things like this in the future.
With all that said I know that MS + Modern Auth works with RC3 and the OAuth2 plugin (as other community members have confirmed) but I don't know where to tell you to look as I just don't know anything about MS products (and their docs aren't helpful).
Cheers.