Hi pmontym,
welcome to the forum!
You are correct, for the main left and right outputs, you should use cables with a TRS (tip-ring-sleeve) balanced male 1/4" plug on one end,
and a male XLR plug on the other end to connect to your speakers, amp or other gear.
The outputs are balanced, line level, and the audio signal is balanced just as it would be if it were a balanced XLR output.
Manufacturers use these TRS connectors for a couple of reasons, they are a little cheaper, but they take up less space than an XLR output.
As far as the unit peaking (clipping), making the sound distorted, well, that may be possible since the gain is auto sensing. Most likely that comment was stated on youtube by a person who simply does not like Mackie products and it is possible that for them, it did distort too easily.
Your mileage may vary
You are also correct on your assumption that if you do observe distortion, then yes, backing off the mic a little and lowering the guitar's volume will help.