Hi!
So I resolved the issue by downloading the office for mac from OWA web app. I have office for mac 2011 already installed on my computer but for some reason, downloading and re-installing office for mac fixed this issue. Now I can use outlook on the desktop and all my problems are solved! This is awesome. Still not sure why it works... but it works!
tl;dr download office for mac from OWA. do a reinstall on you mac. restart computer. Now you should be able to sync outlook through O365 on desktop outlook client