Actually, it's a cycle, first in, first out. Fat gets converted to muscle, muscle gets consumed when the cells die. But when fat is not present, the muscle cells deplete, they cannot be renewed.<quoted text>true, evidently the body will consume the muscle before it will the fat because the muscle transfers energy quicker and more efficiently than fat; when to few calories are being consumed. its harder to convert fat to energy; when you can simply burn up the muscle; if the muscle is not allowed to rest and repair.
like so many things, there is always a healthy balance that must be maintained.
You are correct in the balance thing, the problem is that the balance with differ for every single human, and dietary "plans" are dangerous because of that. Best method is find the point in which you have the most energy, that's probably your "sweet spot," the balance your body needs, for some people it will be big, others thin.