Am I eating too little?

Hi everyone,
I've hit a plateau. Right now I'm at a range of 122-124 each day. My goal is to break 120 by New Years, but I can't even seem to get lower than 122.
I realized I may be doing this whole thing wrong. Through a combination of over exercising and 1200-1300 cals a day, I think I've lost mostly muscle mass and very little fat because I've lost almost 20 pounds and seen no major changes. I definitely feel better and my clothes fit better, but part of my goal is to feel comfortable in a bikini and not be embarrassed of fat on my stomach.
I just read the web page "burn the fat" and saw a new approach. This diet is a 20% of maintenance deficit. That for me would be 1600 cals. The diet also recommends weekly maintenance or above maintenance days where you eat higher calories so your metabolism doesn't slow. It also recommends every 12 weeks or so taking a week off and eating extra calories.
I probably won't follow this diet exactly, but it led me to believe I'm not eating enough. I was planning on changing my deficit from 750 to 500 once I broke 120 because I knew I should probably increase but I just really want to get past 120.
What should I do to get over my plateau? Could you read my diary from the past days and see what I'm doing wrong? How can I increase my metabolism and burn fat instead of muscle?
By the way, I do mostly strength training with one or two cardio days a week depending on what fitness class I go to on sundays.