@Robdstef, @edreded,
Thank you for the information.
I was unable to get OAuth2 to work in Thunderbird 102.15.1 for Microsoft Hotmail/Live accounts as something was wrong with the web page sign in screens closing prematurely, but after many hours spent working on this, I was finally able to get OAuth2 working for Hotmail/Live e-mail addresses using IMAP and SMTP in the latest release version 115.8.1.

It is interesting to note that it also appears that in this version the OAuth2 option is unavailable (for me) using smtp-mail.outlook.com, the server officially listed for SMTP at
https://support.microsoft.com/en-gb/office/pop-imap-and-smtp-settings-for-outlook-com-d088b986-291d-42b8-9564-9c414e2aa040

That said, changing the SMTP Server Name from smtp-mail.outlook.com to smtp.office365.com instead, for my old Hotmail and Live accounts, the OAuth2 option becomes available and seems to work.
It appears Microsoft needs to update the SMTP server listed, and provide better authentication method information, at
https://support.microsoft.com/en-gb/office/pop-imap-and-smtp-settings-for-outlook-com-d088b986-291d-42b8-9564-9c414e2aa040.
I hope my problems are finally over (for now) as this has markedly been a mess.