The MIC ALC limiter is in the Recording Setup menu.
If your loudest source is something on the set and can be cued, do so and set your input levels so that you're just short of peaking, turn the limiter on, and go. You should be fine. If you're subject to environmental, uncontrolled sound, try to wait for whatever sound is the loudest, set levels according to that, make sure the limiter is on, and go. If you're really worried, err on the low side with your levels--but don't go too low. You'll just have more noise on playback.
i have the MIC ALC on and it still will peak in the red. what exactly does it do? I jsut got this thing this week and its got a bit of a learning curve.
It tries to limit the sound from red-lining, but it's not perfect (it only kicks in at a certain level, and only applies a certain amount of limiting). You are still overloading it, so reduce your input levels.
Many limiters are relatively slow. Very fast transients can get past them, and I'd imagine that this one is certainly no exception. Building really good limiters is an expensive and painstaking art as much as science, so I wouldn't expect too much from an onboard camera digital limiter. The above advice is right: just keep your overall levels down a bit and the limiter will take care of the more sustained peaks.