Thank you for this great summary of the current state of knowledge!
I suppose the only thing to do now is to wait for Microsoft to...
(1.) confirm that they did indeed break the protocol,
(2.) and either fix their IMAP4 rev.1 implementation to support LSUB consistently, or push the problem that they have created themselves onto the developers of all affected MUAs by officially supporting IMAP4 rev.2 only. (Really hope the latter will not be the case; that would feel like an abuse of power and a punch in the community's gut.)
Speaking of SLAs:
Assuming an educational establishment had recently signed a contract with Microsoft concerning or including mail services provided by them,
unaware of these emerging issues for non-Outlook users and due to lacking documentation thereof. Do you see any way that such contract could be terminated early if Microsoft were not willing or able to come up with an viable solution..?
I think their efforts will be focused on trying to find the underlying fault. It would just be nice to see WHAT those efforts currently are so IT staff can manage the expectations of affected and pretty hacked-off end users.
It's difficult to assess the level of adoption of the new standard - but in my view, it simply wouldn't be credible for Microsoft to push back a significant change onto so many other major players when they are the only one with a problem and the standard is relatively recent.
In fairness to Microsoft, they do give ample warning to us system admins of major changes normally, so I don't believe this was intentional. For comparison, the basic auth change was 12+ months notice - and that was for MUAs that ought to have been Oauth2 capable for years already (because Gmail have required it for the last few years) and wouldn't have needed any development. Thunderbird added Oauth2 back in 2015 for example. But Microsoft knew that the logistics of getting users to reconfigure across a plethora of different MUAs was going to be a challenge for IT people.
As for terminating contracts, the migration has been done and it could prove more costly and time consuming to back it out, than try and manage the current situation. But if your organisation is big enough to have a Microsoft sales representative, no harm in a senior manager giving them a call.