Connecting well to home using water hose
As Jim Stewart said in the comments, this likely has nothing to do with the pipe size.   Reducing water line size is a common practice.  The pressure is the problem - the pump is generating more than the system can handle and causing damage.

You asked "how can I lay a new water line" and specified above ground.  Usually this is a bad idea because above ground water lines are subject to conditions harmful to them like cold weather (freezing lines will eventually rupture), and general exposure to the elements and things like lawn mowers, trimmers, etc.  

You should plan to bury the water line the same way the old one was - although in your case you probably should be contacting the installer (and possibly a lawyer) to repair the damage and pay for the water damage in the house.