Remove the oauth:// entry for the account in Settings, Saved Passwords, restart TB, enter the new password when the OAuth window appears.

Thanks, but I tried that, it didn't work. The impression I get is that TB treats the password is a new google email address and asks to sign in with google, but it fails with an error saying the request is malformed. Now the account doesn't show up in the passwords list and I keep getting the sign in request.

I'm setting up a new desktop computer and got around the problem by un-installing TB and deleting all related folders. I changed the password for the gmail account. Re-installed TB and the email addresses I want to keep using. They are all working normally. I can't do that with the original notebook computer because there is a no longer available email address with emails that I don't want to lose or spend the time copying them to a different backup. I just need to delete the problem address so I can re-enter it.

I'm running into this with Thunderbird 128 - it always worked with previous versions, but now I get a malformed request error when trying to oauth with Tbird and Google for my gmail account. Starting over doesn't work, Tbird kind of stores something in there, and it won't shut down after that, I need to reboot to try again, and it doesn't work when I repeat the attempt to add the account.

Accounts with OAuth2 authentication work here with 128, so I suggest you check all the basics, including the correct server settings (no googlemail in server names), cookies must be accepted in TB Settings, there is no invasive AV like Avast, and no VPN active to block authentication. Test with a new profile, not one leftover from previous versions.