First, lump-sum distribution is a special basket that is applicable to income that meets the stipulated conditions.  It is not a condition for foreign tax credit.

Second, it is not clear from your questions and the ensuing discussion whether your client is a US citizen residing in Canada or the US.  It may make a difference in terms of treaty application.

Third, there are inherently two categories of income in a pension distribution.  There are contributions that relate to services performed, which is general limitation income.  There is another portion, which is earnings and belongs to the passive basket.

Because there were perceived ambiguities in the treaty provisions and US tax reporting requirements in the not too distant past and there were changes to Article 18 on the various limits, you may like to review how the RRSP may or may not have been reported previously to determine the proper cost basis.