You can adjust the recording level for the EXTERNAL mike input. You cannot adjust the record level for the LINE-IN/OPTICAL-in input. There is no vu meter, but you can monitor the recording for high level clipping.
The external mike jack is the same jack as the LINE/OPTICAL-in jack. When you select EXT MIKE, the jack provides plug-in power for your microphone and a mike pre-amp. The EXT MIKE input does not seem like a LINE-IN boosted to accept a microphone. The Nomad Jukebox 3 has a feature where the LINE-IN is boosted by up to 49db. That results in very noticeable background noise in the recording. And the NJB3 does not provide plug-in power.
On the IHP-120, the level of pre-amp boost seems low. That should prevent the front-end overload from using binaural mikes at loud concerts. Sony MD recorders may have adjustable record level gain, but they can suffer from pre-amp overload even with low record level settings.
I tried some OPTICAL-in recordings (WAV, 128K MP3, 256K MP3) from a CD and found the recordings very satisfactory. BTW, WAV recording is very hard on battery life (two to three hours). And there is a limit of 75 minutes per WAV file. The MP3 limit and battery life is higher. There is virtually no background noise on the LINE/OPTICAL-in, so if you use a high quality mike and pre-amp, you can make publishable music.
The EXT mike input has a small amount of background noise (no mike actually attached). It is slightly higher than the background noise of a Sony MD recorder mike input. With a strong input (binary mikes / loud concert), you cannot hear the background noise.