Gaining weight exercising...

Hi, I started a new job that makes me commute about an hour a day total on my bike. Before this I hadn't ridden a bike since I was twelve. Haha!

So here's the issue - I've gained weight so I stopped myfitnesspal for a few days. However, I'm pretty sure it's muscle weight since my waist measurement has actually gone down a half an inch.

A few questions: Should I change my activity level from lightly active to something a little higher? My job is a desk one but I do ride my bike for about an hour a day (over some hills too).

Also, just so I know whether or not I'm deluding myself, how much is reasonable weigh gain for muscle? I swear my butt is bigger and I've gained like 3-4 lbs in two weeks If I'm gaining muscle and losing fat, then maybe I should raise my goal weight from 120 to something a little higher than that. 1'm 5'4, and about 125 lbs.

Any advice would be appreciated. I heart you, fitness pals! Also, feel free to friend me if you want.
-April