This is a VERY simple fix, once you figure it out!!!
For those of us who use 'Two Factor Authentication' with Apple, where you have to enter that 6 digit code to access anything Apple, THIS IS THE THING that leads to the problem when connecting your iCloud to Outlook!!!
How to fix: you need to go to your Apple ID login page (https://appleid.apple.com) from any web browser. Log in with your usual Apple username and password that you use for your iTunes account. Once in, scroll down to the Security area, and then look for
'App Specific Passwords.' Click on the link and then create a name for this specific password (like 'outlook_icloud') and then a password will be generated for you. Copy that password into memory or write it down or whatever you need to do to remember it.
Now at the same time, have your Outlook Account Settings window open for the iCloud account (you access that from your File/Accounts area in Outlook or from the Mail settings in Control Panel). You then need to copy and paste that password into the iCloud account password field (make sure your iCloud email username is correct - e.g. *** Email address is removed for privacy ***), and then hit OK to test the account. Should work perfectly and stop the send/receive/sync errors.
This app specific password essentially does the two factor authentication for you - and stops that dopey error!
Hope this helps!