Tested on Outlook.com as have no Office365.com account.
If HOST email in Host > Host Settings > Basic Settings > Host Details > Host Email is still host@change.me email will flow.
You will get a Delivery Status Notification (Failure)‏ in Outlook.com for the host@change.me
If you change host@change.me to a real Outlook.com email address then everything just works, without throwing any errors

Thank you very much Ben and Charles!! This enhancement will make SMTP configuration much more reliable.

Merged PR https://github.com/dnnsoftware/Dnn.Platform/pull/868

Confirmed with Charles about what need change here:
Basically

If the host user specifies an SMTP UserName in the SMTP settings we should use that email address instead of the Host user’s email address for the Sender email.

For example in Mail.SendMail, if the senderAddress is the email address of the Host user then switch it Host.SMTPUserName if different.

For the second comment

Change the call

var emailMessage = new MailMessage(fromAddress, toAddress) { Sender = new MailAddress(senderAddress) };

to

var emailMessage = new MailMessage(fromAddress, toAddress) { Sender = new MailAddress(senderAddress, Host.HostTitle) };

I would also suggest that the system uses the Host Title field value as the default Display Name when sending email. Currently it is blank which results in these emails often being rejected as spam. This would not require the addition of any additional fields in the DB or UI, so that code changes would be minimal.

new MailAddress("SMTP Username", "Host Title");

( note that for Portal SMTP, you would want to use the Portal Name rather than Host Title ).