We have been using WordPress at Auburn University for some time. Classes have group blogs and individual blogs and there are numerous other individual uses on campus in various departments.
Plus, if you look in the sidebar under Associated Sites, you will see some experimental uses of the platform and various hacks/plugins to create RSS blogs. Those are used to steer students towards various readings all in one place. Most of them are actually hidden behind password protection.
Some of our blogs are hosted on-campus and others off-campus. The reason for the off-campus hosting is not because of the lack of support, but because the server configurations are quite different. It is my experience that many schools take greater security steps than most ISPs. If our students are going to implement a blog in their professional life, it is advantageous to expose them to the real world hosting environments they will find when seeking a service provider.