I hooked the incoming line to the hot water side and the out going line to the cold water side of my 28 gal. hot water tank. Everything works fine the hot water comes out of the hot water side of the faucet and water get hot pressure is fine. Is this going to hurt anything or should I change the lines around.

It won't "hurt" anything but you are going to have an inefficient heater. Cold is run to the bottom through the dip tube. Now, cold will be on top and only by density will it migrate. The hot will get hotter. Better to switch the piping.

I agree with Brian. While this won't hurt anything. The volume of hot water will be cut way n back. Reverse your hookup. Good luck, Tom