Personal mail gets no love from Microsoft. The last 10 year I have not seen their product change a lot. Notable I see name changes (always a bad sign) and some visual changes. The actual implementation is still the same: not respecting standards. I run a Postfix/Dovecot installation for my family mail. I have had many many different email clients connect to it without large problems. With Microsoft Windows Live Mail, Outlook Express or whatever it is called today, it just doesn't work. Anyway, here is what you can do:
(I am assuming you are using something like Ubuntu with Postfix for SMTP with TLS (actually STARTTLS) on port 25, and Dovecot with IMAPS on port 993.)
Open the file /etc/dovecot/dovecot.conf, and update the line with auth_mechanisms to the following. The trick is that login has to come first:
auth_mechanisms = login plain
Repeat this trick for Postfix in /etc/postfix/sasl/smtp.conf:
mech_list: login plain
Restart Postfix and Dovecot, and you're good to go!