Seeing Results Behind Weight Loss

From Jan 1 2010 to today I've been exercising regularly. My goal is to get to 15% body fat by the end of the year. Which is where your abs begin showing. I did a body fat analysis at the start and I did another one yesterday, I was very surprised by my initial results. I only lost 3.5 pounds.

Which is pretty discouraging, but when I look a little deeper. I see i've actually lost 9 pounds of fat and put on 5 pounds of muscle! Strangely I've put on 4 pounds of water weight. I certainly feel better than at the beginning of the year. I have more energy, feel stronger and look more fit.

Stats:
Exercise 2-4 times a week.
January was spent doing only cardio.
Feb-May I've combined cardio with weight training.
May 2nd I stopped eat anything that has sugar in the ingredient label, that includes gluctose fructose.


Exceptions:
February and March I was sick for 3 weeks
April I went to Cuba for 1 week.

So in 4 months i've worked out regularly for 3.

Results for first 4 months:
Weight Change: 217.6lb to 214lb
Fat Mass: 66.61lbs to 57.81lbs
Fat free Mass: 151.01 to 156.21
-Since my skeletel structure didn't grow, i'm assuming this is muscle mass.
Total Body Water: 110.61 to 114.41.
-This concerned me, why would I be putting on water weight. Am I eating more salt and hence retaining more water?
Body Fat %: 30.6% to 27%

My research: Lean muscle tissue contains about 75% water by weight. Blood contains almost 70% water, body fat contains 10% water and bone has 22% water. Skin also contains much water. The human body is about 60% water in adult males and 55% in adult females.

5.2 pounds of muscle x .75(% of water in muscle) = 3.9
The increase in water weight is due to muscle growth



My Goal:
If I continue to decrease my body fat at this rate I would be at 19.8% body fat by the end of the year, which is a little short of my goal. But if I don't get sick again my routine should get me there. I'll have to reassess my progress in a couple months to see if there is any acceleration in my body fat % loss. I really want to see ABS!!!