The settings are correct, but is the account actually sending on that smtp, or another one that has 'normal password' authentication (which gives the type of prompt in pic. 2)? Select the account in the left pane of Account Settings, then click Edit SMTP server in the right pane. Is the authentication OAuth2? Are there more than one 'Microsoft' smtp servers in Outgoing Server (SMTP) at the bottom of the left pane of Account Settings?

I don't see more than one microsoft server. I've attached an image when I clicked edit SMTP server.

I can still receive emails, but can't send.

Do you use a VPN, or antivirus that scans outgoing mail?

No, I do not have any of those.

Another user had the same issue: the 'normal password' prompt appears even when all MS accounts use OAuth2. The reason is unknown, so I suggest testing with a new profile. Help/Troubleshooting Info, about:profiles, create a new profile, add one account with OAuth2. The current profile is unaffected, and if the new one works, data can be transferred from the old to the new. If you only have the one account with OAuth2 in the new profile, I can't see how the mistaken prompt can appear.