Microsoft is probably happy about it. O365 for Family is $99/year total (not per-person), and allows up to 6 people, and you can use your own domain.
You'll have to manage each inbox separately (I had 4 email accounts in GSuite legacy).
That's interesting...why not?
Edit: Found in their FAQ:
"We strongly recommend against setting your personalized email address as your primary alias for signing in. Doing this can create problems with signing in or even sending and receiving email." https://support.microsoft.com/en-us/office/get-a-personalize...
So it's not clear if you can't, or you can, but it's not recommended.