Hi Lee, I completely agree. Interestingly enough on earlier Yamaha arranger models (aka: Tyros2), Yamaha included:

1) mic trim knob (back of keyboard)
2) mic input vol knob (on top of keyboard)
3) mic track vol (via LCD screen)

Yamaha Tyros 4 no longer has got that mic trim knob on the back of the keyboard, so one must rely on the mic input knob alone to monitor the signal input (using peak light indicator) boosting the signal as high as possible without letting the peak light indicator go red. Once that is done, the mic volume level can be raised/lowered on the LCD Screen without resulting in distortion.

I've discovered the mic distortion problem may be partly due to the brand/model mic used. It's important to use a mic that's got a hot signal output. Over the years, I tested several and found EV and Sennheiser dynamic mics to deliver higher output than others. I've had good success with the EV757 and now the Sennheiser e935. Utilizing a high signal output mic means not having to turn up the KB's mic gain knob (knob on top of the keyboard) as high to get a good strong signal, preventing preamp distortion. Once this is adjusted, I use the volume slider to control the 'mic volume' shown in the LCD screen. Raising and lowering the mic volume up/down in the LCD now does not result in distortion.