Advanced assistance needed with Microsoft and 3rd party email/domain addresses

We are having bit of a nightmare trying to figure out what, why, when, how, etc with the current email setup we have at Powerserve.co.nz

A few years ago now, another long past technician set things up like this:

Outlook Account (li****@powerserve.co.nz) - We can login to Outlook.com with this

Forward facing email account = li*****@powerserve.co.nz

The customers email client ()Outlook 2007/2010() uses MAPI to connect to this account, which provides emails from or thru the Outlook service.

Fast forward 3 or so years and we are trying to add new email addresses to the domain @powerserve.co.nz

We create a new Microsoft account and add an alias *** Email address is removed for privacy *** and are told by the web form "you cannot use that domain address, choose another" - So we try powerserve.com and it works just fine.

Currently, the MXrecords look like this

mail.powerserve.co.nz doesn't work as the pref order specifies pamx.hotmail.com as the forefront mail server. Ideally this mx configuration cannot be changed as it would break the existing system

It would seem that perhaps Microsoft have reconfigured their services and the way that this was setup isn't available anymore.

Is this the case?

And if so, is there another way to set this up?

Many thanks in advance for your response :)