The log is suggesting that some error ("(500) Internal Server Error") is occurring on the Office 365 server when logging in. I wouldn't assume that this is really a bad username or password.
You could try running the following commands in PowerShell to troubleshoot further--if this doesn't work, maybe contact Microsoft for help.
$c = Get-Credential
Connect-MsolService -Credential $c
$users = Get-MsolUser -All
NB. If you do this in a PowerShell window on the FlexNet beacon then the prerequisite Office 365 PowerShell modules for running this should be installed.
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