@LeonT I'm glad that you were able to resolve your issue and thank you for posting your solution so that others experiencing the same thing can easily reference this! Since the Microsoft Q&A community has a policy that "The question author cannot accept their own answer. They can only accept answers by others ", I'll repost your solution in case you'd like to "Accept " the answer.
Issue: You are facing an issue with Azure SQL Managed Instance database mail. you have confirmed that SMTP details are correct and have created an outgoing and inbound NSG rule for port 25. However, you are still unable to send database mail.
Solution: As you mentioned you didn't realize that port 25 is blocked, and you changed port to 587 and now it works.
you found this here in MS forum https://learn.microsoft.com/en-us/azure/virtual-network/troubleshoot-outbound-smtp-connectivity?source=recommendations
If you have any other questions or are still running into more issues, please let me know. Thank you again for your time and patience throughout this issue.
Please remember to "Accept Answer" so that others in the community facing similar issues can easily find the solution.
Regards
Geetha