I did finally get the user deleted, it didn't work through the admin console, had to do it this way:
the account needs to be deleted by following the steps listed here:
1. Open a web browser and go to https://lastpass.com/delete_account.php.
2. Select Delete.
3. When prompted, click No to indicate that you do not know your Master Password.
4. Enter your account email address, then click Send Email.
5. Check your inbox and follow the instructions in the email to continue with your account deletion.
Once synced, you need to remove the user from the app in Azure > wait for azure to sync > add the user back to the app in azure > wait for azure to sync so it creates the user again.
An email would be sent with the instructions on how to set up the account.
Try disabling federated logins on https://lastpass.eu/company/#!/settings/federated-login/azuread (beware its .eu, you might use .com)
That way youre only syncing users but not using federated login, lets hope it works
After a bit more testing, Single Sign On does work with LastPass if I'm already logged into O365. However, it doesn't seem like it has Single Sign Out which is fine with me. Just wondering if this is documented anywhere?
Not sure since I dont use it, but you could try https://lastpass.eu/logout.php as logout URL in the Azure AD > App Registration > app > Authentication setting
I personally think this isnt needed because you simply never log out through LastPass, only through O365. I dont think its documented either (since its not necessary)