This has been happening to me on and off with microsoftonline.com and other microsoft logins. I believe there is some combination of site settings that solves this, but I have not found them yet.
I type in my email, redirect to the password page, then after entering my password the page refreshes and it says my password is incorrect. I go to Arc and login with the same credentials and my login works. I now use Arc for any microsoft services that I need to use because of this.
Current version where I just experienced this: Version 1.0.4 (143), WebKit 624.1.2.19.2
MacOS version: 26.2 (25C56)