It seems to have worked. I went to the Microsoft Store and attempted to install "pepperplate" a free cooking app I had before. It took me to the page asking for the local password, and then actually made it to the page asking for the Microsoft account. That all worked, and in the end it actually installed the app.
I will say that just before that I tried to do connect the local account directly in the PC Settings / Accounts area. It failed like it always had.