It seems that the original authenticating protocol for windows 8.1 phones no longer works, hence a factory reset will set the protocol to its original state. Windows 8.1 phones that have been in regular use do not have this problem, because the protocol has been automatically updated.
I found a fix as follows.
- Make sure time and date are set correctly. It is probably handy to have nearby a computer or other device that can receive e-mails. If not, you can probably configure the phone to receive non-Microsoft e-mails, even if you can't access the Microsoft account by the means you have tried.
2. Start Internet Explorer and go to the web address: login.live.com
3. This opens the Microsoft login page. If you have a Microsoft account, login now and go to 5: if not . . .
- Create a Microsoft account. This will require a secondary e-mail account other than Hotmail. You may be sent a security code to the secondary account and you will need to receive this and enter it before you can proceed further.
5. Stay logged in to Microsoft. Go to Settings, e-mail+accounts, Microsoft account. You should now see a screen asking for your credentials again. Enter your login name and password and secondary e-mail address.
6. A security code will be e-mailed to the secondary address. Enter this.
7. You should now be good to go. Try to install an app to test it. (A useful app is the Flashlight.)
In general, if apps fail to download the problem is probably do to failure of authentication of the Internet path to Microsoft, and a login to the login.live.com page usually restores the authentication.
Using this method, I was able to download apps and the upgrade advisor, and successfully upgrade to Windows 10.
Dunno if you'll get an update about this response, but I tried these steps and still had an issue where when I tried to go to login to the account, I wasn't prompted for a credentials. Just the same "Sign in" or "Create account" screen and it still failed to activate.
Any thoughts?