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First, make sure your FlexDeploy Server Base Url in General Settings matches what you entered in Azure Application redirect. The server base url should NOT include the /flexdeploy/faces/oauth however.
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Populate OAuth Information
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SMTP Host Name - smtp.outlook.com
SMTP/IMAP Username
Client Id
Client Secret
Tenant Id
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Authorize and Validate
In order to authorize, you should login to outlook.com as the user you wish to authorize as first. Otherwise, especially if you are using SSO, it is likely that you will be authorizing as the wrong user. The idea is that when you click authorize, it will ask you who to login as, and you will select (or type) the same user that you have in the imap user / smtp user box that you are authorizing.
After populating the necessary fields, click either the Authorize or Re-Authorize buttons. At this point you will be re-directed to Microsoft to authorize FlexDeploy as the same user that you have in the imap user / smtp user box that you are authorizing. If everything is successful you should be redirected back to this page:
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Sends a test email to the logged in user's email address to validate the SMTP OAuth settings.
Reads the inbox of the Approval Reply Address to validate the IMAP OAuth settings.
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If you authorized as the wrong user, you will get the error:
Bad User is Authenticated But Not Connected
If you get that, reauthorize as the correct user, then restart FlexDeploy, and then test again.