The circumference is
C = πd
The diameter of the metal pipe is
d = C/π = 2.5/π = 0.796 inches
The total diameter is still 0.796 inches because the diameter of the metal pipe is greater than the inside pipe. Imagine that the pipe is inserted, so there are no changes in size. Of course, the pipe is also a hollow cylinder.
The diameter of the inside pipe is actually given, 1/16 inches.