Above what volume is sound distorted?
This question might be hard to answer without some rigorous definition of distortion and qualification of what amount of harmonic distortion is permissible - let alone some clue as to what signal is being played. 

In general, the headphone jack is desired to distort sound. Whether its muted or amplified, the output isn't what the recorded sound actually is. 

Have a look at these threads fr background:


Why do I get &quot;no volume available&quot; when using an iPhone 4s in a dock?
Stop high frequency noise from iPhone dock&#39;s line out in car adapter


So - you could get an adapter that generates a line-out level signal and control things from another amplifier or you could experiment with signals you choose and find a setting that doesn't sound distorted to your ears. My guess is most people would set the volume a 60% for most commercial pop music and perhaps a little higher for softer music that isn't compressed so aggressively as pop music.