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Interesting. Well, like I said previously, I'm using Exchange Online (office 365) so it's microsoft's own servers I'm running on. BUT, we do have it setup with our logins to Exchange are ******@sec-domain.com while our email addresses are ******@pri-domain.com. This is because we're part or a larger company who manages the primary email domain themselves. But we run our own exchange email system as that works better for us. All email goes first to our primary email hosting and is auto-forwarded to our secondary domain which is our exchange online account. I set our primary domain email addresses as our reply to accounts for all of our users. So for all anyone can see, we are all sending/receiving emails from our primary domain. But we actually log into our exchange accounts using our secondary domain.
I wonder if this is where the problem is coming from? This setup has been working for years before and after moving to Exchange Online. And continues to work for Outlook 2010 and 2013. Outlook 2016 initially can connect up this way. But maybe at some point it tries to validate something and assumes that the login account is the same as the reply address and freaks out.