Configuring preferences and options in Outlook.com
Didn't fix it for me. Tried deleting account...updating gmail...re-adding hotmail account (with exchange settings)...and I get the same security error.
I think Microsoft has to change something on their end so exchange plays nice with the new gmail security settings. Perhaps it's an account by account thing - but I'm not sure how we track that down!
Not sure what's your setup, but this is what I did & hope it helps.
- I have two-way auth enabled on Hotmail
- when setting up the exchange account, I choose do it manually.
- use m.hotmial.com as the domain
- generate an app-only passcode from the security section and use that as the password.
That's what I did.