Q1: Have I correctly done this portion of her tax return as far as you can tell?
A1. Yes and congratulations. As you now know, it's not easy.
Q2 on my tax return: I should enter the 1098-T data but not the 1099-Q (since 1099-Q was fully utilized under the student's return) - do you agree?
A2. Yes.
Q3. This will give me an AOC credit of $1000. Anything else?
A3. Check form 5329 (and line 23 of form 1040) to be sure she was not accessed the 10% penalty on the $204.
The AOC comes in two pieces. The refundable portion is on line 29 of form 1040 ($1000 max). The non-refundable portion is included on line 20 (via Schedule 3) and is $1500 max. You will not get any of the non-refundable portion, if your tax liability is already 0 (line 16).
