Hi @Geomix7 , I tend to agree with @G_W_Albrecht that most of your questions are actually answered in the quoted solutions. Nevertheless, let me answer to those questions directly:
Q: Those services is a combination of IP addresses & domains .How an IP address (mechanism) is checked to verify if match for a domain which is included in Office 365? How this Mechanism works?
A: List of IPs and domains is pulled from the source. Domain objects are also resolved into IP addresses.
Q: Where to position this rule in rule base and why?
A: Updatable objects can be used in the rulebase at will. As they are SXL-friendly, position does not matter.
Q: Any performance impact?
A: Practically no impact.
Q: Known issues ?
A: Specifically for O365, sometimes resolution of MS wild card objects can be incomplete, for certain sub-domains. These occurrences are very rare, but if you experience one, feel free to address it with a support ticket.
Q: Any impact in DNS server?
A: Some unfrequent periodical DNS requests are being sent by FW, but the amount of those is not high at all, and will not affect DNS servers much.
I hope this helps.