Will it not still have keylogging telemetry though, at least while using the app?

Funny you should mention updates. The problem is when the developer wants to keep adding features and release a paid upgrade to make that possible. If you bought through the app store, you're going to have to buy the new version all over again, because there's no way for the developer to offer an upgrade discount.

As for sandboxing, yes it does prevent unscrupulous apps from doing shady things, but it also prevents apps from doing their jobs. The MacOS image viewer that I use is a great app called Xee3. I made the mistake of buying it through the app store instead of through the developer's website. So now when I open an image and hit pagedown to browse to the next image in the directory, I have to click through a popup granting it access to read the directory, which is the app's way of working around the sandbox restrictions. So the app store version is strictly worse.

Not really relevant in the context of Office 365, or other applications that follow the same subscription model