Q. Is it deductible because it appears on my W2 in box 1?
A. Yes. That's exactly why it's eligible for the tuition credit ("deductible")
I can see your confusion, when they say "The was paid for at 100% by the university and none of the tuition expense were out-of-pocket. Therefore, you would not want to utilize the form (1098T) to claim it as a deduction". I'm of the opinion, that is wrong. It (the amount above $5250) was paid with your taxable money and is eligible, even if not literally "out of pocket".
Similarly, students (or their parents) on scholarship may be allowed to claim the tuition credit. From the form 1040 instructions: “You may be able to increase an education credit if the student chooses to include all or part of a Pell grant or certain other scholarships or fellowships in income. For more information, see Pub. 970, the instructions for Form 1040 and IRS.gov/EdCredit". PUB 970 even has examples of how to do that “loop hole”.
