I'm using Thunderbird 78 on Windows 10. I have Zohomail set up with an phone confirmation when I log on. I've generated and used the app-specific password from the Zoho website. And Thunderbird still tells me that either password, account name or configuration are wrong.
I'm using the automatic Thunderbird setup mechanism for an IMAP account. All I have to do is insert my username (Zoho address) and password. Thunderbird does the configuration. My Zoho address is, of course, just what it is. As for the password, as I said, I've used the app-specific password generated on Zoho by copying it and pasting it into Thunderbird, not by trying to memorize it.
I
assume that a number of other Zoho users employ Thunderbird for their
email. I've checked the prior Thunderbird issues here on Zoho, but I
haven't found one that states that an app-specific password has been
obtained and will not work. Though of course I do not know for
certain that the password is the problem.