I'm glad to report that at least for my situation, I have now been able to add my Outlook Email account to the Mail App under Sequoia on my new MacBook . It is currently in the process of downloading my Email. The Inbox is up to date with the Web based Outlook and Mail under Monterey on my older MacBook.
Based on Dave's comments I contacted Apple support and described my issue. They had no details about the issue, but did suggest I upgrade to the latest version of Sequoia.
I was running 15.6. So I thought it cannot hurt, so I updated to 15.7.1 after which I immediately tested adding Outlook to Mail. I selected the recommended choice of "Microsoft Exchange" as the provider. I gave my Email address and then clicked on the "SignIn" button like in the past. However, unlike in the past where there was a new window quickly overlayed with popups about failing verification, the window was from Microsoft and wanted info to verify my Email account!!! I filled in the Email address to send a code to, which showed up and I entered into the updated window. That worked and I got a new window asking what services of Outlook I wanted to use. I selected just Email like I had been using. At which point the new "Exchange" account was created in the Mail App. The settings are almost identical to what I had and is still on my old MacBook. Only difference I found is what to do about erasing deleted Emails; Never vs my previous after 1 month.
I just sent an Email from another account and it took awhile, but has now shown up in the Outlook account on all my machines!! I suspect my new MacBook Mail is sluggish since it is still downloading Email. Also the Outlook servers may be busy if other people are in the process of fixing their access to Outlook Email.
Hopefully you all will have the same luck I had it getting Outlook Email access back. I have no idea if my macOS upgrade fixed this or Apple and Microsoft did magical things in the background. Maybe Dave can learn some details from his contacts.
Good Luck and Good Night