This type of question is a little frustrating because each piece of software is different, and the limitations of one program's feature or plug-in may not apply to another's.
Generally, of course, you want to record at more or less the highest levels you can without risk of overload. The question is really whether your M/S matrixing software is written in a way that avoids overload during the sum-and-difference arithmetic that it has to perform.
Fortunately the task of an M/S matrix is so simple that you can suss it out by simple means. In most editing software there is some ability to generate test tones. So you can generate a stereo pair of sine waves (say, at some midrange frequency such as 500 Hz) at some exactly equal level between -3 dB and 0--what would ordinarily be a mono signal, since it's the same in both channels. But if you treat these as M and S inputs and run the M/S matrix on them, you will see whether or not one channel is driven into clipping as the two (identical) waveforms are added together.
Some software has an output level control, but where that control fits into the process is not entirely clear until you experiment. It might "pre-scale" the inputs, or it might allow the inputs to matrix and over/underflow, then "scale" that (already distorted) result. If it's the latter, then you have to take care of your recording levels before matrixing. Ideally the documentation would explain this, but who am I kidding ...
Several things that you might see include: One channel clips (flat tops and bottoms of the waveform); one channel actually wraps around when the sum exceeds full scale (very bad for the sound quality!); and any gain control that you have might help avoid either type of clipping, or it might simply shrink the size of the clipped waveform after the damage has been done.
--Agreed, for certain recordings and tastes (and some playback equipment and listening environments) some relatively modest amount of low-order harmonic distortion can enrich the sound. I don't suppose anyone here has heard one of them newfangled electrical guitars, for example? These kids with their "rock and roll" music? Well, I heard--it's just a rumor, but--I heard that sometimes the players actually drive their electrical amplificators into distortion on purpose. They even step on petals (?) to do this, which just desecrates the flowers that they came from, I would imagine. Where will it end? Where's their sense of dignity?
--best regards