1. Every time I want to switch a mic the 2i4 gain levels peak red. I've tried different ways like unplugging. The mic first then the cable from the 2i4. No matter what I do it peaks red and I'm worried I'm damaging my interface.

2. I do guessing the Line switch is mics and the Instrument switch is for DI?
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1. it works that way, but your not hurting your interface in any way.
You're just overloading it, which means the signal coming through will be distorted because of the high volume, which in your case is caused by a switch of impedance.

2. Line/Inst means low/high impedance.
If you fancy, go on wikipedia/britannica.com and read about impedance.
If you don't, the basics is this field are that already pre-amplified signal are line level - take keyboards' output signals, are low impedance signals; really low level stuff, such as the output from microphones and guitars, is instead high impedance stuff.
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The peak will not damage your interface. I would however recommend turning any monitoring down/off when you're doing that as at full volume it could damage your speakers (unlikely, but possible nonetheless).

Line vs Inst settings is to do with the level it's expecting. If you're running straight into the interface then you want Inst. If you use some form of external preamp then you should set it to Line.