Eat back calories?

Yes, because that's how MFP is set up. http://community.myfitnesspal.com/en/discussion/10503681/exercise-calories-do-i-eat-these-a-video-explanation

Yes but most people recommend eating back only half since exercise calories are typically inflated.

We're the same height and I'm marginally lighter than you at the moment. I've got MFP set to lose 1 lb/week and I'm on 1380. In practice, I'm typically losing between 0.2 and 1.8/week with occasional 'whooshes', usually after TOM. On average, it's about 1.5, 1.6 I'm eating back half my exercise calories. I've also set 130 as my goal weight, so still about 53 lbs to go.

The more you exercise and the lower your calories, the more important it is for you to eat some of those calories back. When I weighed 254, was exercising 25 minutes a day (leisurely walk) and burning under 200 calories on a daily allowance of 1710? Those extra calories were a cushion in case my logging wasn't as accurate as I thought. I was still using measuring cups for solids, then.

But now, I'm closer to goal and I'm exercising over 2 hours every day. (Still walking a lot. Also strength training with dumbbells.) And I'm on fewer calories. If I don't eat back some exercise calories, I don't have the energy to fuel those walks. I'm also more irritable because I'm hungrier. Eating back 50% is working for me. And the exercise helps my stress levels, which curbs emotional eating. And, let's be honest: on lower calories, too many food decisions become "either/or". With more exercise, there's more room for "ands". So if I want to have a piece of cake at my nephew's party. Or a restaurant dinner where I'm not doing a Meg Ryan impression from "When Harry Met Sally" (no, not the fake orgasm bit!), it becomes a lot less "What meal am I going to go light on so I've got room for this?" and a lot more "Hey, cool. That three hours of walking means I've got about 400 more calories to play with today. That makes the cake/restaurant main much more doable."