I wrote to Craig Federighi, and within 24 hours he responded.
He said, yes, Microsoft Exchange does work for personal accounts.
When I tried it again, I realized my error. I had been picking "Configure Manually," and not the default "Sign In" because I thought the latter was for established Microsoft Exchange accounts. Whenever I did "Configure Manually," after I entered my email and password, Microsoft would always return with the message: "Sorry, but we're having trouble signing you in. User account ******** is a personal Microsoft account. Personal Microsoft accounts are not supported for this application unless explicitly invited to an organization. Try signing out and signing back in with an organizational account."
So this is why I assumed this option did not work for personal accounts. However, just to check everything before I embarrassed myself by replying to Craig that his information wasn't correct, I tried the default "Sigh In," and that returned with a dialog asking me something to the effect of whether I wanted Apple to have access to my Microsoft information. Upon clicking YES, my personal Outlook account (and all its subfolders) was successfully added (although it shows up now listed as "Exchange" and not "Outlook" in macOS Apple Mail). And I got a message from Microsoft Authenticator that this account had been added, which never happened when I used "Add Other" under macOS Apple Mail.
For those wondering: Deleting/Flagging an Outlook email in macOS Apple Mail set up under "Exchange" successfully deletes/flags that Outlook email in iOS Apple Mail set up under "Outlook." This is not an issue at all.
So "Add Other" is really probably just there to accommodate any fly-by-night email provider one may use and probably will only ever provide Basic Authentication. It "works" for Outlook (for now) but is not ideal and if you have a personal Outlook account and you originally set it up under "Add Other" in macOS, I'd delete it from Apple Mail and I'd set it up under Exchange. Then you'll have modern authentication and won't have to worry about the September 16, 2024 deadline.
In my email to Craig, I asked why there wasn't an explicit Outlook option in macOS like there is in iOS. He addressed that only by writing, "We are working to make our UI more clear in this area." So, maybe at some point there will be.
As a side note: I looked at the Recent Activity for my account online at outlook.com and because that email address has shown up in data leaks, there are 20 some attempts a day from sleezeballs from all over the world trying to get into my account. It has a really strong password but I wish Microsoft would reject all attempts from outside my region or move to passkeys.