I use the method described above to cap the speed. As I understand the damping is a way to slow bodies (or their rotation) over time. You can check out my LD29 game ( http://www.ludumdare.com/compo/ludum-dare-29/?action=preview&uid=7738 ). I used a very low damping value, so the cells in the game continue to drift in the same direction, even if the player stops pressing the direction keys. It creates quite a floaty feel to the game.
I’m getting to know box2d a bit better by building a pong game. There I also linear use damping, but for the paddles. The damping value is quite high. With this the player can release the direction keys and the paddle will still slide a bit further in the direction instead of stopping instantly.
So I think the damping is a very valuable tool in box2d. You have to try out what parameters work best (keep in mind that the strength of the damping might also be related to the mass. more mass => damping has less effect. I’m not sure about this but it would make sense).
But I don’t use the damping to limit the speed. I think it is the wrong tool for that.
Please take my advice with a grain of salt, because I just started using box2d some weeks ago.
And if you want to stop your bodies from rotating, then you can use body.setFixedRotation