Microsoft
MicrosoftThanks ukazim for correcting me. you right. we cannot store M365apps update on the cloud DP. (I deleted the post that contain the wrong advise)
Open question:
"The BG would be setup to prefer cloud distribution points. When the clients do not find the content on the CMG they will move on looking for the content on the next set of DPs as per the content lookup request based on the boundary group."
If the boundary group is configure to "prefer cloud based sources over on-premises sources", the client should get it directly from Cloud DP or Microsoft.
https://docs.microsoft.com/en-us/mem/configmgr/core/servers/deploy/configure/boundary-groups#bkmk_bgoptions4
How did you configure the Office update?
If in the deployment download settings you check the option "if software updates are not available on distribution point in current, neighbor or site boundary groups, download content from Microsoft Updates", and you do not synch the update content with the cloud DPs then the client should fallback to Microsoft to get the content.
Did you try that option?