Outlook 2016 doesn't accept password or app password

Since you are in the know, may I ask if MS is working with Google to strengthen and sort out the OAuth issue on their EAS protocol stack? Or is MS only supporting IMAP for Hotmail accounts on Android? If you guys can make this clear, it will help us find solutions or find ways to move forward.

The screenshot you posted suggests EAS is at least working with Thunderbird's plug in. What about Gmail? Or are both MS and G refuse to work with each other to resolve this? If latter, MS will be on the losing end of this and I am saying this as sincerely and honestly as I can be.

I can confirm. Using the button "switch to Modern Auth" (translated from German, English button may be different") in settings of MS account on Android will - not - display the loginscreen posted by David.

Sometimes, GMail tries to open an URL starting with "login.microsoftonline" in the string. Within under a half second the window is closing without any interaction.

Same behaviour if GMail is set to open URLs in "own application" or "new Chrome window".

Try to set the Google DNS servers as in the image, I could no longer add my @hotmail.it accounts to Outlook 2016, by setting the Google Servers I succeeded.

The "Switch to Modern Auth" option in Android's EAS setup screen works... for my work Office 365 account. It does NOT work for personal Hotmail account. I reported this exact issue many posts ago - same symptoms you are describing. I tried let it switch to Chrome browser, Brave browser and even relaxed all privacy settings in the browser and no go, so it doesn't appear to be a browser setting related issue during OAuth authentication. In fact, the same browser and settings works fine when I do my work Office 365 account's OAuth setup. This is also the reason why I challenged MS David's assertion that OAuth is supported on personal Hotmail account. I want to see that be done on a late model Android device but they have never proven it to us.

If this is an "Google issue" then Microsoft needs to work it out with Google. The EAS stack is likely licensed or co-developed, so with MS and G needs to get together to resolve it - if it's truly an issue OAuth support on a particular EAS stack. But I don't believe it to be the case. I actually think some Hotmail accounts, likely the older ones or ones that existed for many many years, are not properly provisioned to support OAuth on EAS.

Sorry, I am not sure if I understand what you wrote. Are you saying it works if you set DNS to Google's 8888/8844 or it doesn't work? I have tried use my ISP's DNS, Google's DNS and a few others, and made no difference. And that's assume Outlook use symbolic URL instead of IP address when contacting its servers.