Hi MG__,
Thanks for your post in Microsoft Community.
Based on your description, it appears that the passwords at the Microsoft level are working as expected, but the passwords at the Apple level are not functioning as intended. This seems to be more of an Apple issue. I recommend that you contact the Apple Support team for further assistance.
Contact Apple support team: Official Apple Support
Disclaimer: Microsoft provides no assurances and/or warranties, implied or otherwise, and is not responsible for the information you receive from the third-party linked sites or any support related to technology.
Finally, while we can't assist you further, I hope the information I've provided will help you find a better direction.
We will keep this issue on file in case our great volunteers come up with ideas for you.
Best regards,
Thomas C - MSFT | Microsoft Community Support Specialist