Foreign Earned Income Exclusion

[cientax]

I have a client that lived in Mexico, he is U.S. Citizen and married to non resident while in Mexico. He filed the Federal tax return for Mexico but did not file U.S Income tax returns (2009 and 2010). They were moved to Texas in January 2011 and wife is now legal resident and has SS number.

I am wanting to exclude the earned income but I am confused when it comes to reading the publication regarding claiming the exemption of the spouse. She was not a U.S. resident during the time they lived in Mexico. He began living in Mexico in late 2007 and is considered a bona fide resident.

This is where I'm confused:

In claiming her exemption, should I make the filing status MFS and claim her exemption same as the children in line 6 for dependents, or should I make the filing status MFJ?

If I make the filing status MFJ, is he still entitled to take the exclusion for the foreign earned income?