Using older versions of Outlook for Mac in business environments
Based on the highly detailed technical breakdown you provided, I completely understand the issue you are facing. You have identified a critical client-side HTML rendering regression specific to the Legacy Outlook for Mac UI (affecting versions 16.70+ through 16.113) across multiple macOS versions (Ventura, Sonoma, and Sequoia).
In my testing environment with Legacy Outlook for Mac version 16.109.3, the content of the original email is still retained when replying.
With that in mind, may I kindly confirm which version of Legacy Outlook for Mac you are currently using? You can check this by going to Outlook > About Outlook.
If your version is higher than 16.109.3, you may consider reverting to version 16.109.3. This can be done by removing the current Outlook version and installing version 16.109.3 using the updater.pkg available from the Update history for Office for Mac - Office release notes | Microsoft Learn
After that, you may turn off automatic updates for Legacy Outlook for Mac by going to Help > Check for Updates > unchecking Automatically keep Microsoft apps up to date. As an alternative, you may also try the New Outlook for Mac, where this behavior does not occur.
I hope this provides some helpful direction.
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