Can't see why he isn't, as JD said, this is the regulation...
For all matches from the start of the round of 32, a club may register a
maximum of three new eligible players for the remaining matches in the
current competition. Such registration must be completed by 1 February
2008 at the latest. This deadline cannot be extended.
One player from the above quota of three who has played UEFA club
competition matches for another competing club in the current season may
exceptionally be registered provided that the player has not been fielded:
− in the same competition for another club,
− for another club that is currently in the same competition.
Furthermore, if the player’s new club is playing in the UEFA Cup, his former
club must not have played in the UEFA Cup at any point in the current
season.
From that it's completely clear that he does qualify. There's some stuff in the regs about five or six of the registered 25 needing to be "local" but that's not a problem for us. Don't understand it. Valencia didn't play in the UEFA cup and as they finished fourth in their Champs League group they're not in it.