The electronics should be run at the highest possible gain, at a given supply voltage, where feasible. For example, if the line stage is designed for 20dB of gain, and you run it at 5dB, the THD will go up tremendously, and the circuit may even become unstable. The higher gain also gives you the best S/N ratio.
It's the right way to pad down the signal level, then to lower the gain. The noise in the system is typically 'White', so the less gain, the less useful dynamic range.
It's the right way to pad down the signal level, then to lower the gain. The noise in the system is typically 'White', so the less gain, the less useful dynamic range.

