according to the attached data sheet it should be out of regulation
Those minimum voltage differential requirements are specified at pretty high current levels (usually at or close to the rated current levels). An arduino board will not draw anything close to that kind of current. So smaller voltage differentials will work - there are two charts in the datasheet that indirectly speak to that.
Plus, out of regulation doesn't mean it doesn't pass power anymore. It just that its ability to regulate output voltage is gone.