Can I enable two-factor just to generate App specific password for Outlook Mac, then turn two-factor back off

To address just the turning on and off aspect: For some background I suggest you read the support article: "Two-factor authentication for Apple ID" - Two-factor authentication for Apple Account - Apple Support

When reading that article some people (including some providing advice on this forum who miss the part about some people being able to disable the feature and just say you cannot) have difficulty determining if a person can or cannot disable two factor authentication on their accounts. Here's the actual situation:

Several years ago Apple transitioned to using two-factor authentication for additional account security. Accounts created since that time automatically use two-factor authentication and this indeed cannot be disabled.

Some people have older accounts from before two-factor authentication was mandatory on new accounts. Apple encourages those users to transition to two-factor authentication when signing in on their accounts because without it "your account is less secure and you can't use features that require a higher level of security." However, the support article also says in tiny, light-grey font: "If you updated to two-factor authentication inadvertently, you can turn it off within two weeks of enrollment." In other words if you have an older account, recently activated two factor authentication ("inadvertently" or not), and you're within the two week period for turning it off again, you should check for an email from Apple for a way to do this. If you don't see one about this, look in your junk mail folder.

I don't know if turning it back off will mess with the other things you are doing. Some services require 2FA be on in order to work and most people do not have the option to turn off 2 FA at all.