I'm so confused

How many calories does MFP give you? Some people eat back 50%-75% back of there total workout calories. As long as you stay above 1,200 you're good. But thats an extremely low deficent and you might want to up it. Last thing you want it to burn out an binge/quit the diet. Do a reasonable number and dont overdue exercise!

Just to add: make sure you read all your labels properly and measure things out. Luquids with measuring tool and buy a food scale! Trial and error, if you don't lose weigh or inches, start making changes. Lower calories or be more consistent on measuring out food and recording it. It's all about what you eat!

Is the walking you're logging part of your regular daily activities? If it is then your setting of lightly active would be fairly accurate. However if that is the case then you shouldn't be logging it separately. The MFP calorie goal is calculated to include your regular daily activities as part of your chosen deficit.

Take me for example - I walk between 5 and 10 miles a day for work so have MFP set to 'lighly active' I get a calorie goal of 2130 for my chosen setting of 1.5lb a week loss ( I'm a big guy so get lots of cals to play with) and that's what I eat towards every day. Now I use MapMyWalk to track my daily walks as a way of confirming that I'm doing the mileage I think I am and this syncs to MFP and gives extra cals which I don't eat because the walking is already included in my activity setting.
If I were to eat them I'd be 'double dipping' my exercise calories and wouldn't be in a calorie deficit.

Now when I go to the gym and use a cardio machine I'll log that and eat back 50% of those calories because they aren't part of my regular daily activities ie; not included in my calorie goal.

Does that make sense? I hope so but I don't always translate thoughts into words very clearly

Also 2lb a week may be too aggressive a setting for you depending on your current stats. I managed it at first because I was over 300lbs but I've dropped it back to 1.5 now that I'm down to 235, and I'll be dropping it further to 1lb a week within the next 10lbs or so. That way my daily calorie goal stays around the same 2000ish number and I don't get hangry.

Good luck!

Is your walking included in your "light active" activity setting...if so, those calories requirements are accounted for. If you're using MFP as designed, your activity level should just be you day to day without any exercise and then to account for exercise and log that after the fact whereby you would earn additional calories to account for that previously unaccounted for activity.

If you're including your exercise in your activity level then you would be "double dipping" if you ate them back...essentially you would be doing the TDEE method.

You just have to understand the methodology and where you're accounting for exercise in the equation...if you're doing MFP as designed, exercise is accounted for after the fact and those calories are not initially included in your targets...you would log and then earn additional calories....if you're doing TDEE, exercise is included in your target so you would just eat to your target. So essentially, depending on the method, you're either accounting for exercise activity on either the front end or back end of the equation.