User within Company, Sign-in Blocked - Adding into Sharepoint Error

[Technician123]

If a user within the company has their sign-in blocked, when marking down that user's account within a SharePoint page, would the error "Your organization's policies do not allow you to share with these users" appear?

I believe so, but wanted confirmation from others as well.

I think because this users account has sign-in blocked status, O365 is taking it as this user is outside the organization, even though this user is in organization.

[#2]

No, this shouldn't be related. Keep in mind that some functionalities within SharePoint use the email address instead of the UPN, and if those two differ in value it might explain what you're seeing.