My ticket ref is already on here - just so other IT support teams can cross refer to it in any ticket they might raise, as it contains a fair bit of testing on this matter. Only I and Microsoft will have visibility of my ticket, and no point putting your own ticket number up for that same reason. Regarding your other questions, here is a summary as I see it for the benefit of your support folks:
IMAP4 Rev1 (RFC 3501) dates back to 2003 and LSUB is a supported command in that version.
IMAP4 Rev2 (RFC 9051) was issued in August last year, and LSUB is no longer used in that version.
But the publishing of a new proposed standard doesn't mean the old one is immediately null and void, as it requires plans, and often development work, and often industry co-operation too, to adopt it. So the answer to the question in my opinion is: LSUB is a valid command to be sending to an IMAP server that supports the earlier standard.
Other questions and my view on the answers is currently as follows:
Q Do Microsoft support the earlier standard and therefore LSUB?
A Yes - because their server responds to an IMAP CAPABILITY command with IMAP4 Rev1, and some O365 mailboxes are receiving and processing the LSUB command issued by MUAs correctly.
Q Why are some O365 mailboxes affected and not others?
A That's for Microsoft to explain - they have the inconsistency. I've certainly found nothing to explain the inconsistency in my affected/unaffected accounts to date, and I haven't been able to get a FAILED account working, nor have I been able to get a WORKING account to fail.
Q Is this a client/MUA problem?
A It was never likely once the pattern started to emerge. So many different MUA products were simultaneously affected at the start of November, and only O365 mailboxes were impacted, not other mail service providers. MUAs either reported an LSUB related error directly to the user OR reported it when IMAP was debugged at an appropriate level within the MUA product. Microsoft Outlook when configured for IMAP (as opposed to the more usual MAPI) is also on the list of affected MUAs. A Powershell test script issued to me by Microsoft and capable of simulating what an MUA does, replicates exactly what the MUAs are seeing/reporting too on affected mailboxes.
Q Can anyone else have a play with the Microsoft Powershell script?
A Not if you are an end user, as it needs administrative access to the Azure AD on the O365 tenant where the affected user is. If IT support people would like to give it a go, I can post instructions up, but bear in mind you're going to need the password (or reset it) for the affected account as you need to log in as them. In any case, I have already posted up what the script is doing, and what the results are in this thread.
Q Is there an SLA Microsoft should be working too to fix this?
A Microsoft have an SLA for availability of Exchange Online when accessed with OWA. I can see no SLA covering the IMAP interface.
Q Is there a workaround?
A Seems to depend on your MUA product. Thunderbird and Outlook over IMAP - I can personally say yes because I have tested both. You can configure both of those to override folder subscription and display all the remote folders (includes a load of rubbish you won't want to see but it's tolerable). Any others, you might have to research your own product. Nastier workarounds if you're really stuck include users using Outlook Online, or changing the MUA they are using - and neither are going to go down well.
Q Is this problem linked to the deprecation of basic authentication that happened on O365 in November?
A My accounts, both affected/unaffected, had been using Oauth2 for months. On my tenant, I have had basic auth re-enabled for testing purposes and still see the problem with an affected account reconfigured back to basic. So I see no evidence the issues are linked.