Losing Weight but Feeling Bigger?

I have lost 4.5 lbs since the beginning of this year (MFP rounds it to 5 lbs), but I've lost 3 lbs in the last 6 weeks. For a smaller person like me, I feel like this is a lot, especially when I am also battling low blood sugar episodes with being type 1 diabetic. I'm excited and proud of the weight that I've lost, and I've especially noticed it in my waist and thighs.

However, certain areas of my body actually feel BIGGER! Like my upper arms. I've never had skinny arms (or a skinny anything, really), and when I played softball in high school as a catcher, my arms were quite muscular. After softball was over and I gained my Freshman 15 (+5) in college, my arm tone went down and turned into something more flabby.

Now that I'm getting back into working out, I've noticed that my muscle tone is starting to come back but my fat is staying there, too. I only do strength training about 2 days/week at most, and the other days I'm doing spinning, kickboxing, or softball on my company league. But even those cardio days involve strengthening my arms, especially kickboxing and softball. So my upper arms feel huge right now! Will my muscle eventually eat away the fat that's hanging around? Please give me some hope that I won't feel like Popeye's long lost sister forever. :frown: