You are right if 1 ADA would be 100 Dollar (I’m dizzy) then 1 Lovelace would be 100 / 1,000,000 = 0,0001 Dollar, which is 1/100 of a cent. Should be really small enough.
I can’t answer the question about the fixed point fraction and if there is some sort of parameter but what I know is that the protocol and the smart contract layer calculates everything in Lovelaces it’s not a decimal. So in the current version this is really the smallest fraction.