According to the log:
The server advertises SASL PLAIN and SASL LOGIN.
SASL LOGIN works, SASL PLAIN doesn't.
Now the twist:
You've got an *identity* under the account, same email address, same password (I hope), same server.
( this doesn't make much sense to me, but maybe you've got a reason for it )
The *account* outgoing server settings are to use SASL LOGIN -- and in your log, I can see it work, you sent a message, it went through.
The *identity* is set to have its own outgoing server settings, and it has SASL PLAIN, and it fails, the server doesn't accept the login + password, says they are not recognized.
To fix:
Long press the account -> identities -> tap the identity
You'll see the identity's email address and "Use own outgoing server" enabled (checked).
Tap Manual.
You will now see the detailed outgoing server settings for the *identity*.
Now change authentication *here* to SASL LOGIN and it should work.
And yes it has to be a bug on the server side.