Calories earned from Exercise?

Question:

This is my first week using MFP- I love it, by the way. My only concern is how your remain calories for the day increases when you exercise... For those of you who have lost weight, do you stay under 1200 calories total, or do you adjust it with your exercising?? For instance, my calorie goal is 1200 a day. I've been doing some serious workouts on the elliptical, burning 500 calories. Then my calorie goal for the day goes up to 1700. If I eat those back, am I really going to lose weight? I feel like that's a lot of food for dieting losing 2 pounds a week.

Any feedback would be great. The only way I have ever lost weight is by only eating 1200 plus lots of exercise.

Thanks.

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