Using classic Outlook for Windows in business environments
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But that doesn't resolve the categories function. The categories function does not seem to be live (icon is greyed out, etc).
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Correct, it won't fix categories. Because that is a different issue. They are not supported in IMAP accounts. but I have some workarounds in this article:
Outlook Categories, Flags, and IMAP Accounts (slipstick.com)
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I changed from POP to IMAP when Gmail required 2-step authentication, June 1,under advice from an IT person, who believed it was more secure. But you're telling me I CAN use 2-step w an outlook app password (however that is done! - another issue) - and not have to enter it repeatedly?
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If you want to use POP, you need to enable 2FA and then use an app password in outlook. This is because the POP protocol in Outlook does not support oAuth2, which is more secure than basic auth. IMAP protocol in Outlook 2016 and newer supports oAuth2.
Under most circumstances, Outlook should not ask for the app password after you enter it the first time.