Yes, the METAR weather is blended with the MeteoBlue model weather, and the transition between METAR and model surface wind and temperature appears to happen around 1000 feet AGL above the airport.
I believe that the hourly airport METAR data does not come from MeteoBlue or from the LiveWeather servers at Azure, but from a third party server ever since r/w METAR was first added to the game in early December. For that reason, the METAR values for airport wind, pressure and temperature will normally be present (and accurate) any time LiveWeather is active - even if the MeteoBlue forecast model is missing or outdated.