Configuring preferences and options in Outlook.com
I've been searching for an answer for this issue, and this thread seems to be the only one I could find that looks promising.
I'm here as a user with this problem, but I'm also an IS consultant, so may be someone be interested in my opinion. I will try to use the simpler language as possible (but in english is more difficult because I'm italian.)
On the server side the "rules" in question are stored as collection of statements with references to "resource", where folders and categories are resources. Each resource has an unique ID code (to which are aggregate all informations, as the name) and is referenced only by this ID, so in the collection are stored just IDs (not names nor any other information). When the system loads a collection (of rules in our case) and before doing any action, it checks the integrity of all contained resources by looking at their ID.
This said, if you change the name of a resource its ID code does not change, so all works fine. But, if you "delete" a folder or a category and then you recreate it, even with the same exact name, you end up with "a new" resource, i.e. a new ID code. Now all rules that have a reference to the old ID remain orphans and this is a problem. The preventive check, of which we talked before, is performed exactly to menage this cases and it correctly "raises an exception" (i.e. a sort of "call for recovery the error"), giving the ball to another part of the software dedicated to this "emergency".
But... and we are at the final point: the error message we all receive trying to create a new rule, states clearly that this exception is raised but not handled, and this could be only for two reasons: 1) the dedicated handler is missing or 2) the exception raised is malformed. At 99% we are in the second case, imo. In other words, no one piece of software hears or understands the request for help. The consequence is that the procedure devoted to manage the rules crashes and... and we are all here!
And in fact, in my case, when I deleted an empty folder still used by a rule.... bingo! in the same exact moment this problem raised up.
I repeat: this is only my opinion; I'm not in force at Microsoft, be clear!
I simply hope my notes are enough to explain why deleting all the rules restores full functionality to the account, but of course this does not eliminate the problem in the server software.
Regards from Sardinia, the island of the wind
PS "Granting the access" is only a formal authorization statement, a declaration of consent, you don't have to give your password.