That figures it. Your Exchange Online (Plan 1) mailbox still talks to Outlook using the older Exchange Web Services (EWS) protocol, and the new Mac client’s drag-and-drop handler is currently broken for that path in version 16.102.3.
So while the hotfix is currently being worked on, make sure automatic updates is turned on. As for the drag and drop issue, use Attach File → Browse This Computer for that one account until the fix ships.
OWA works normally, so that’s also a good temporary workaround.