How do I Implement Soft Clipping in an Audio Circuit? Or should I just Attenuate the Signal?
Generally speaking, it's a good idea to place signal-processing circuitry before the final amplification stage (especially in the case of speakers, where you are using quite a lot of amplification).  This allows you to work with lower-level signals.  For soft-clipping this is especially nice, as it allows you to use diode or transistor turn-on voltages as your threshold.  In your case, a soft-clipper can be implemented using a unity (or otherwise, if necessary) gain op-amp topology with parallel, inverted diodes in the feedback path, potentially with resistors to set the change in gain as the diodes enter their operational biases.
For more information, look into guitar distortion circuits on your search engine of choice.  Many of these incorporate soft-clipping elements of this style (in addition to diodes on the amplifier output performing a harder clip).  You will also want to tune the circuit by ear, as different diodes have slightly varying behaviors that can lead to dramatically different sounds under clip.