Touch bar icon for Caffeine does not match status of app in menu bar

I’m not sure what you mean by being marked away - are you referring to your status in Microsoft Teams? Because the only thing the Caffeinate button does is prevent your Mac from going to sleep and the display from automatically dimming. It definitely doesn’t control anything about any applications - especially online/away status - but Caffeine doesn’t do this either, so I’m not sure where this comes from, haha.

So long as your Mac does not automatically dim the display and does not automatically go to sleep when the Caffeinate button is activated, then it is working as intended!