Using classic Outlook for Windows in business environments
Dear James Hubert,
Welcome to Microsoft Community.
According to your description, you want to add your Hotmail account to Outlook through IMAP, but the password is incorrect. Don't worry. I will explain the situation in detail. I hope my advice can help you.
First of all, I want to make it clear to you that after September 16th, Microsoft started using modern authentication, basic authentication can no longer be used to access accounts with any Microsoft domain and if your Microsoft domain email account (@Outlook.com, @Hotmail.com, @msn.com, @live.com) is configured to connect to Outlook.com using POP or IMAP, modern authentication is not supported. So when you use IMAP in Outlook to add your Hotmail account to Outlook, it shows that the password is incorrect.
You can apply modern authentication to your Hotmail account by selecting the Outlook.com option when you add your Hotmail account.
For more information about modern authentication methods, you can refer to Modern Authentication Methods now needed to continue syncing Outlook Email in non-Microsoft email apps - Microsoft Support.
I hope this information was helpful. If you have any questions, please let me know, I will be happy to help you further.
Have a good day.
Best regards
Jim - MSFT | Microsoft Community Support Specialist