Hi MM_mymatrixx,
For further troubleshooting, I would like to collect some detailed information:
1. Did an Office 365 user or on-premise user encounter the issue when he sent emails?
2. Based the Non-Delivery Report (NDR) provided, it seems that the email was sent to the affected dynamic distribution group. Could you please confirm it?
3. Can the affected sender send emails to the affected external contact directly? If no, please provide the NDR after sending emails to the affected external contact directly.
Thanks,
Claud