@Daniel Vitek
Thank you for your detailed post!
I found a related issue answered by @Kael Yao-MSFT and will post the solution shared below.
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535 5.7.139 Authentication unsuccessful:
There may be two possible causes for this issue.
Please refer to this link and check point 3 (Azure Security Defaults) and point 4 (Conditional Access policy): Error: Authentication unsuccessful
These settings would block Legacy Authentication.
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I hope this helps!
If you have any other questions, please let me know.
Thank you for your time and patience throughout this issue.
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