A common issue I experience after setting up an Exchange modern hybrid is that Outlook clients will not automatically repoint to mailboxes once migrated from Exchange on-premises to Exchange Online. This is an issue that is not often resolved in online forums and message boards, and took quite a while to resolve the first time around.
When you set up a modern hybrid, and migrate a user’s mailbox, that user’s Outlook client needs to be redirected to the migrated mailbox in Exchange Online. If there are issues with autodiscover redirection (which is handled by the hybrid), your user’s Outlook client will endlessly prompt for basic authentication credentials, which is often not supported in Exchange Online by authentication policies and will be entirely unsupported in October 2022.
You will need to publish a registry key using Group Policy to allow autodiscover requests to use modern authentication. Create the following registry key and set the value to 1:
HKEY_CURRENT_USER\Software\Microsoft\Exchange\AlwaysUseMSOAuthForAutoDiscover
