Sound Preference Pane --> Select "Line In" from the list, and check the levels in the live display at the bottom of the window. Adjust input gain with the slider there until you're getting levels that look good.
Also, I don't know how you could possibly ruin a mic regardless of what you did, since that's a passive line-in port--there's no power, so nothing you do in terms of gain will have any direct effect on the mic.
You could do the opposite, however--if you had the gain really low, and were using the mic too close to the sound source to get the levels where you want them, it could eventually start to wear due to high sound pressure levels. I'd only expect that to be an issue with loud instruments over an extended period of time, though.