Asnwer:
Activate 2FA in your Microsoftaccount ( https://account.live.com ), then go to Security->advanced security and create an AppPassword . Then remove the old outlook account from mailspring and create a new one (Outlook, not Outlook365),
You can try to update the old account password but I am quite sure it will fail because the settings are still for IMAP and not the (now) required App registration.
OAuth requirements by Microsoft blocking login for greater security. https://oauth.net/getting-started