This is a tricky situation. To know which approach yields the lower overall tax liability you really have to run the numbers both ways. In my experience, it's usually better to claim the foreign tax credit on all income and forgo the exclusion. But sometimes the opposite is true. It depends on how much foreign tax you're paying, your total income, etc. There's really no way to know without running the numbers using only the foreign tax credit, and again with the exclusion for part of the income and the foreign tax credit for the remainder.
Also keep in mind that if you previously have claimed the foreign earned income exclusion, and you elect not to claim it this year even though you qualify, you're considered to have "revoked" the exclusion. When you revoke the foreign earned income exclusion, that generally makes you ineligible to use the foreign earned income exclusion again for the next 5 years.
