I found this on teh intarwebs and thought it would be helpful to some other UKYers out there. It's a -very- helpful and informative guide on the two topics, as well as several tangential topics (passive vs. active income, housing allowances, etc.), complete with worksheets and examples. It's 14 pages, but you should leave with a crystal clear understanding of these topics. It's up-to-date as of the 2007 changes in the tax laws, which were significant enough that some decisions made in previous years should be reconsidered.
To provide a horribly terse synopsis: if you made less than $87,500, you probably should choose the Foreign Earned Income Exclusion method, whereas if you made more than that there may be benefit in considering the Foreign Tax Credit method (if you're UK tax rate is higher than the US tax rate).
http://findarticles.com/p/articles/mi_6773/is_1_7/ai_n28522856/pg_1?tag=content;col1~Aaron
