Hi MiniTech15,
We appreciate the quick follow-up, and thanks for those details! Have you tried to revoke the app-specific password for this account and create a new one? The fact that you receive a password error using Outlook, but not when you use iOS devices or iCloud.com, suggests this may help you clear up the issue. Here's how, from the article titled Using app-specific passwords.
How to manage app-specific passwords
You can have up to 25 active app-specific passwords at any given time. If you need to, you can revoke passwords individually or all at once.
Sign in to your Apple ID account page.
In the Security section, click Edit.
In the App Specific Passwords section, click View History.
Click next to a password you want to delete, or Revoke All.
After you revoke a password, the app using that password will be signed out of your account until you generate a new password and sign in again.
Cheers!