I would take some very small scissors and trim up the damaged lace.

I havent personally used the fray check yet, but there is a thread here somewheres about applying it. I looked but didnt find it.
I think I remember it being said to put the hair on like you normally, then apply a thin layer to the front edge of the hairline, over the lace and some on the scalp.
With a q-tip.
Currently, I do this with that got2beglued, and it helps block lint, dirt and dust from collecting in that area.