I've found a good way to assess whether i'm losing fat or muscle whilst dieting.
I measure my waist and my bicep once a week. If my bicep stays the same and my waist comes down i'm losing bodyfat etc.
THIS WILL PROBABLY ONLY WORK IF YOU'RE BELOW 15% BODYFAT. AS ABOVE THIS LEVEL PEOPLE TEND TO STORE A LOT MORE FAT ON THEIR ARMS.