Using multi-variable calculus you would write a formula for distance from the point (1,1,1) to the arbitrary point (x,y,z) (this second points needs to satisfy your equation since it lies on the line). You would then apply the multi-variable optimization procedure: Find the critical points of this functions (those points where both partial derivatives equal zero or those points where either partial derivative is undefined) and examine these to find the minimum value for distance.
If you do want to use linear algebra, a vector from the point (x,y,z) (on the line) to the point (1,1,1) is $<1-x,1-y,1-z>$ Now take a directional vector from your line and compute the dot product of this with $<1-x,1-y,1-z>$. As you said, this dot product should be zero so solve for x,y, and z.