Don't know if this has been said but you are not supposed to use the yubikey on your mail client. Google recommends you use an application password for email clients. As someone who has 5 yubikeys for different services I know this sounds unsafe but is the only way I've been able to use some of the mail programs with Google. The other option would be to enable another 2fa (maybe auth codes with Yubico Authenticator) and use that on the mail programs.
For Google I ended up using web client and fido2 (and another yubikey as backup and another as auth code generator) and my work requires Outlook but they also ask me to change passwords each month and input them on different platforms that don't support f2 and that breaks a few things for me so I opted for Yubico Auth and use my yubikey instead of Microsoft Authenticator or Google Authenticator.
That's interesting. Do you know of something that can solve the contacts issue? I have 1 or 2 added contacts in Outlook but 140.000 other employees on the directory. When I need to send a mail I just type the name and Outlook web finds the person. I would really need that for a third party client. Also calendar. My company is super restrictive with this. No smtp access and no easy direct integration. I use web because Outlook (the program, but also everything Microsoft) sucks. On Android I use Outlook but I can't copy text or take screenshots, which also sucks.