Microsoft updated its verification - especially if you added 2 step, and even if you turn it off.
http://windows.microsoft.com/en-us/windows/app-passwords-two-step-verification
Had to find the above to fix the issue and then reactivate my account on the mac. Nobody on MS tech support had anything to say about this, and its frustrating this is only on a windows site that you wouldn't naturally look at. But it works. Outlook may
not, but open word or excel and do it, then the whole 365 suite should function fine. Outlook gave me an error code, but word was allowed the password and all is well now.