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I am sorta lucky that I for some other reason turned off auto cloud backup a week ago, so my backup data on the cloud is dated 3 days before this issue happens. I completely wiped off the game and all save data for every user on my Switch, reinstalled the game, re-downloaded the save data, and everything came back normal, except losing some progress. When I first started the game with those old save data, it even didn't ask me to re-connect the Xbox account. It just auto-logged me in as if nothing ever happened.

Earlier today, I was forced to log out once again, but after I went through the remote-connect process, I successfully re-linked the Xbox account.

I don't think this issue is at any point solved. I just hope my experience will help you Mojang guys figure out where the real problem is.

@Caden Harmon If you re-download your save data from Nintendo Switch Online server, will that issue happen again ?

I had done that Clear Account Sign in Data things several times, but to no avail. I have also tried deleting and reinstalling the game, logging in with another Nintendo account and Xbox account, both of which have never been linked or even used on that particular Switch before. Just got the same error. So it seems that this issue is not just relative to specific accounts only.

Same as Aaron's here. It was fine before, but forced to log me out today, and required me to reconnect the account ( needs visiting aka.ms/remoteconnect ), after finished those things on my phone, "We tried to sign you in to your Microsoft Account, but something went wrong." shown on the Switch.