I've lost a kilo this week just from diet alone as I couldn't train last week. I will most likely find a happy medium between the two as you said, but I just feel so elated, similar to when I went vegetarian.
Don't be in a rush. Losing more than 1 - 2 pounds a week (the upper limit is for very large people ) increases the chances of losing more muscle while you lose fat. You do that too much and you end up "skinny fat" at your goal weight. Squish, soft, still looking fat, weaker, just lighter. If you are reducing make sure you get plenty of quality protein and exercise to reduce the amount of lean tissue lost.
beforewisdom is so right: slower is better. In addition to the points made above, a big one is that the equilibrium of your body will be thrown way out of whack. Sudden weight loss or gain jumbles your hormones, insulin sensitivity, immune system response, tissue inflammation, even the speed at which signals travel down the nerve pathways, which can really mess with you in the gym, not to mention everywhere else. The body responds to sudden changes as emergencies, and it works hard with everything it's got to get itself back to it's original state. It will, however, acknowledge something as a permanent change when it sees it happen gradually over time and has the opportunity to recalibrate itself to the new system.
Relax, enjoy the journey. It's a fun one.