You should always, always set levels manually.
The ideal is to make sure the loudest sounds at the show don't overload the recorder. Unlike analog recording, when you wanted to get as hot a signal as you could without overloading, you have more leeway with digital because you can boost it later. So if your music peaks at -6 or even -12 db, it's no big deal.
The best way to test this is with a disposable opening act--make sure the peak is well below the maximum. And then dial it back a little more because the headliner gets to be even louder.
If you have Auto Levels they will wreck the dynamics of the music.
I just looked at the DR-07 manual and you're right, it is confusing. If I understand it right, Peak Reduction works throughout the recording like a variation of Auto Level--you don't want that--while Limiter just kicks in with sudden loud sounds, kind of like an airbag. So if you have somebody standing next to you who whoops like a train whistle at the end of every song, right next to your mic, Limiter might catch him.
As you will see, there are some almost theological preferences here about this. Some people say Never Ever, some people say it's last-ditch insurance. Personally, I use the Limiter on my recorder, a Sony PCM-10--and hope that it never has to kick in, because I have the music peaking at around -6db. But choose the right levels and it won't matter.
And as noted above, the less audience noise you get in the first place the better. Except for the whoopers and whistlers, Limiter really isn't going to help or hinder much either way.