Is your account in Thunderbird POP or IMAP?

The account is IMAP and the server I am using is smtp.office365.com. This particular setup has worked for me for quite some time without difficulty.

I have done a bit of testing and can reproduce the problem at will. Any email that is moved to the secondary delete (in Outlook speak that is "permanently" deleted but held in a separate space for recoverable emails NOT otherwise observed in the delete or trash folder) are not recognized by TB.

I found another thread on Substack where the contributor had exactly the same problem. They resolved the issue by routing the emails through another email client (they were working in a Linux environment and used Evolution). That email client recognized the Outlook emails as being deleted and they were found in the Evolution deleted items folder. The emails were moved to the Inbox (within the Evolution client) which updated the Outlook server and seemed to correct the problem. Thunderbird could now read the emails in the Inbox and they were downloaded and handled appropriately. Evolution did not install on my Windows based system. I installed eM client instead and it has the same issues as Thunderbird.

The email account is IMAP. The server is SMTP.office365.com.

I can reproduce the problem at will. On outlook if an email is permanently deleted it is moved from the "Trash" and into a secondary recycle bin. There the email is "recoverable" but not otherwise viewed in any folder. Any recovered email is put back into the Inbox ( or target folder) and can be viewed in Outlook. But those same emails are not observed in TB.

I found a message on Substack describing the exact same problem. Their solution is roundabout. They downloaded another email client (Evolution used in a Linux environment) which was able to read the recoverable emails as deleted. The deleted emails were placed back in the Inbox and voila, the Outlook server was updated and now, TB could see the emails. I am in a Windows environment and Evolution does not work. I installed eM client and that software has the same problem as TB.

Let me make what I am understanding clear, because I am confused I think.

Outlook has some location that is not visible as an IMAP folder where it places mail that you have deleted permanently. You expect Thunderbird to not only know about this location, where ever it is, but access it despite it not being visible to the IMAP protocol being used to connect to the server.

BTW you send mail via an SMTP server all mail in all folders is accessed to view from an IMAP server. In the case of office365 it is outlook.office365.com I believe

You are almost correct. Outlook has a secondary recycle bin that allows emails to be recovered for a specific period of times even if deleted. (Mine is set for 30 days) That repository is not visible in the Outlook folder view nor in TB. But, once emails are recovered from this repository, they are then returned to their originating folder (Inbox, Sent Mail, etc...). At this point Outlook can see the messages in the correct folder. TB cannot see those messages. And, if TB accesses the server, those emails are then deleted and they go back into the repository where they must be recovered again.

I have used a piece of software, Stellar OST viewer, that can read the local Outlook OST file. The recovered emails are in fact found in that file. I would expect that TB should be able to read them as well. But that does not happen.

Here is a link to a Stack Exchange site where I found a user reporting the exact same problem. https://superuser.com/questions/1793425/thunderbird-deletes-mails-after-recovering-on-owa