Someone, who shall remain nameless, asked me about exercise, so I'll give you my take on that.
Of course it's important! You have to build muscles in order to burn more fat more efficiently. We've heard it a million times!
In my case, I figured... one thing at a time. I've been a member of my gym for about 5 months now, and until I started this diet, was going 3-4 days a week. Fifteen minutes on the elliptical, and then various weight machines. I also have a fairly active job. So I'm not a couch potato, unless you call typing into a blog a couple times a day potato-like.
I cut back on the gym only because with a drastic reduction in calories, I felt I had better let my body get used to using the energy I give it, and not put too much of a strain on the whole system. I don't know what would happen if I got to the gym and didn't have enough energy to do a decent workout. Would I feel faint? Would I just get tired? I don't know. But I thought it was best to chill on the workouts for a bit. I still have my active job, and the calories I burn there are keeping me from turning to mush. I have good muscles, and I eat enough protein to maintain them. As I get smaller, I'll start going back to the gym.
Remember, the whole concept of calories in/calories out is based on exercise, and burning more calories than you eat. In order to lose weight, you have to have a deficit there. You have to eat less than you burn. It couldn't hurt to find a website that has a BMR calculator (base metabolism rate), and determine what you're burning daily just through breathing and body functions, etc. That helps you determine how many calories you can eat, and still keep a good deficit in order to lose weight. But you don't want to go under 1050 calories for the day, so if that's the only way for you to reach a deficit that will let you lose weight, I suggest more exercise.
And that's all I have to say about that. :-)