Lost...

I think you're over-complicating things. MFP is set up to make it easy, so trust the system. For now. (Later when things are going smoothly, you can play with the numbers if you want.)

Set your goals in MFP. Tell it how much you weigh now, how much weight you want to lose each week and your activity level. It will give you a daily calorie goal that already has the calories you need to eat on a daily basis to lose the amount of pounds you want to lose each week. In other words, that deficit is already built in for you.

Part of this process, however, is setting realistic goals. If you don't have a lot of weight to lose, you shouldn't be trying to lose very much each week. It sounds like you're aiming for a 1 pound per week loss (500 calories/day) which is probably a good place to start. You can always tweak it if you feel you're not getting enough food to be satisfied.

So, with a 1 pound per week loss goal, MFP is going to subtract 500 calories per day from what it has determined your maintenance calories are. That's probably your 1220 calories so you'll eat 1220 calories every day. If your activity level is anything but Sedentary, you'll almost always eat 1220 calories unless you are active above and beyond your usual level. On those days, or any day if you're set at Sedentary, you'll log any calories you burn during exercise. MFP will then add those exercise calories into your daily goal and that number will go up accordingly. You will then eat those extra calories because your 500 calorie deficit is already built into it.

One thing to be very careful of is that you aren't entering inflated calorie burns into MFP. If you have a heart-rate monitor, use it and enter those numbers into MFP. Remember that you would have burned calories just sitting on the sofa, too, so a one hour Zumba session may read 600 calories on your HRM but you would have burned 100+ anyway so subtract those out. Always underestimate calorie burns or you're doing yourself a disservice and you'll get frustrated when you aren't losing weight. Any calorie burns you get directly from MFP are suspect and should be cut in about half to be safe. MFP has no idea how hard you were really working and its numbers are almost always too high.

TL;DR: Eat 1220 calories plus any (under-estimated) amount of exercise calories you've burned that day.

oh and another thing...eat at LEAST the 1200.

MFP already has your deficit, based on your stats & weight loss goal, in the 1220 #. To 'see' it better go in and say you want to maintain your weight. Just to see the different calorie recommendation.

The 1220 # is based on your stated activity level. That's your lifestyle, job, etc. Does not consider your exercise. So when you exercise, consider consuming a little more to make up for the additional energy expenditure.