Most of the manuals I have reviewed say hold the mic at 2 inches.
It's a good practice to never talk directly into the mic, head-on style. Hold it to the side of your mouth, or about 20 degrees turn off axis. This keeps all the air escaping your mouth from making a ("P" percussion), air style popping effect that is highly annoying to listen to.
Never exceed a distance of more than about 8 inches from the microphone. When you exceed about 8 inches, you need to increase mic gain which will inherently increase background noise and room reflection pickup. Not to mention you'll sound considerably softer to anyone on the other end without some sort of mic gain compensation.
For more info: google : repeater etiquette
If your deviation is too high several things can happen. You may get ‘break through’ onto an adjacent channel (‘bleed over’ in CB parlance). If the receiver (in the repeater) has a narrow filter (suitable for a lower deviation) the signal may be ‘chopped up’ with only parts of words being heard. You may also not be able to ‘access’ or ‘bring up’ the repeater (see below).