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To create a two-line label
1. Type the text for the first line and press INSERT.
2. Use the arrow keys to select Second Line and press . A multiline symbol is inserted at the end of the first line, but will not print on the label.
3. Type the text for the second line.
Here's the manual, see page 12 -
The fix for this involves opening the unit up. The problem is the infra red LED sensor on the label exit has slightly miss-aligned giving the error. If you unscrew the two sensor boards, re-align and screw them back all will be well.
You probably didn't damage it, it sounds like you may have knocked loose the thermal printing portion (which is the most important part). There is no easy way for you to repair this but Dymo will usually do it for free under warranty. Their phone number is: (203) 588-2500