Conditional Access blocking Office Activation and signin.
When the Conditional Access Policy is configured with All cloud Apps option, Office activation is also blocked, although there isn´t any cloud app dedicated for Office activation exclusion. Please create one dedicated cloud app for Office activation.
Peter Johnson commented
Perhaps add a new 'User Action' for registering Office
One of the catches in this scenario is that when a company requires Azure AD joined systems to access Office 365. Users can no longer login from a personal owned home computer to download Office, of activate an installed version of Office.
Using Office 365 software for personal use is only an option if CA rules allow home computers access to Office 365 (or Intune managed systems for example). Then you have to enroll your home computer.