Mail tries to use the highest security level available, based on the response to the CAPA command. This is fairly standard behaviour.
What's not standard is how it handles the situation, should the preferred authentication method fail due to lack of support. Normally, a client would continue through the list provided by CAPA, until it found one that _was_ supported.
The problem occurs when the most secure method of authentication reported isn't truly supported by the server. Mail is treating this just as it would any other authentication failure.
The results of the CAPA command can't be outright ignored, as they are necessary for knowing what the server is capable of. But often software provides error handling that differentiates between different root causes.
There are several mail and proxy server packages that may unintentionally misrepresent the server's capabilities. If you are running a server that is affected, you would want to look into this, as it is generally undesirable behaviour.
It's not unreasonable for Apple to expect a certain adherance to standards, and they could not have tested it with every server package in existance. Some bugs will only reveal themselves once a product is deployed.
I hope that the eventual update includes better error handling, perhaps by way of notification rather than outright failure. Those of us with buggy systems should be made aware of it, but it shouldn't inconvenience our end-users.
And while it can be frustrating to wait, it's generally better not to rush out a quick fix to meet demand, as this could just cause new and unexpected problems.