I did find an exception to the adjustment . Adjustment exception. If you qualify for the adjustment exception,you can elect not to adjust your foreign source qualified dividends. You make this election by not adjusting these dividends.. If you make this election, you must elect not to adjust any of your foreign source qualified dividends. You qualify for the adjustment exception if the amount of your foreign source net capital gain, plus the amount of your foreign source qualified dividends, is less than $20,000 and one of the following applies to you.  

Does this mean that I can take the foreign tax credit even though no US tax is assessed on the dividends?

When the Final Regulations for §904 were issued back in 2004, §1.904(b)-1(b)(3) and (e)(2) were added to carve out an exception, which, according to TD 9141, "is intended to permit taxpayers to avoid the complexity of computing the rate differential adjustments in cases where the failure to make the adjustments does not result in a significant divergence from the results contemplated by section 904(b)(2)(B)."

Based on the letter of the law, you may decide not to make the rate differential adjustment and create a limitation for FTC.

Is the limitation  created by the calculations in Form 1116?

Yes, it is.