Connect to Outlook Calendar View is grayed out(O365)

Yeah unfortunately that's why. The list template type must be a calendar type in order to sync it with Outlook, a custom list with a calendar view is just a custom list template so it doesn't have the same content type fields etc. that will sync into Outlook that same. In order to sync it you have to create the list as a calendar app first, then use it to slice and dice to be able to do the basic sync.