This topic has been closed after 90 days but the issue is still there in 3.6
Thanks to your original post I used Re-authenticate as Post #11 and Notes changed from non functional just as you describe to working.
Were you able to try that?
I tried, it does not work.
Plus : it would be weird to use the account password, dedicated app passwords are there for this use (so they can be revoked, for instance), not to mention OTP.
Anyway : still failing.
Not on fair phone, but notes are not syncing but displaying error message for me as well since a while. Xiaomi 12.