@sid3011 - So sorry I missed your question a while back. I do believe your issue is permissions related. The "Test Data Source" feature only checks whether a connection can be established between Paxata and the Data source you've configured, it does not attempt to read or import a file. So your intuition is most likely correct, that this issue is permissions related.
Have you been able to resolve this issue? If not, please reach out to your Customer Success contact and we can help resolve this. If so, would you mind posting your solution to the community?
I get a Failed to login into "https://sharepointaddress/sites/mysite/": invalid username or password. Even though I am the owner of the site. I've tried both username and domain\username with same results