"The question of the day:  Let's say that I decide to remain a BMI 29.9,
but I go to the gym every day and work out for 3 hours.  I become Mr.
Universe Iron Man.  Am I just as well off, in terms of Diabetic risk
factors, as I would be if I were a skinny BMI 25?"

What is more important is fat distribution for you at this point.  
Assuming the usual diabetic fat belly the risk factors remain high,
insulin resistance is promoted, the fat cells are pumping out hormones
which contribute to the metabolic syndrome and other factors.  The best
predictor of problems is bmi plus belly circumference.  It is not muscle
mass that is the most of your present bmi, it is fat.  By reducing carbs
and increasing lean protein one can best avoid muscle loss when losing
weight; along with the well advised course of weight based exercise you
propose.

BMI is a pretty arbitrary and useless metric.

Yes, you can reduce body fat and keep and/or build muscle mass, have a high
BMI, and assuming you control your BG and have good lipid results, you ought
to be fine.  Of course, there are no guarantees.

It's not your BMI that's the issue, but how much truncal fat you're carrying
around. Your body fat percentage would be more useful; but perhaps the
simplest measure of all would be to get your waist measurement down to
normal. Dunno what it is for you males, you'll have to look that up yourself

target.

Nicky.

Congrats on changing categories! That's one of my near-term goals - to
move from from Obese to the merely Overweight.

I have either 1.7 or 2.6 BMI points to go to get there, depending on
which leg I measure my height on (I broke one as a child and it's
shorter than the other!).

IMHO, BMI is just a rough guideline and not a  tool that works for
everyone.  Some folks with large frames and lots of muscle are "Obese"
by BMI terms but have a much lower percentage of body fat than the BMI
score would indicate.
And some very small framed people may have their body fat
underestimated for the opposite reason.

A friends son who is a solid block of muscle got dinged on a physical
for having a too-high BMI even though his six pack has so much
definition you could ski down it like moguls :lol:.

A more accurate way is something they do pretty much only at research
places and schools - I think they weight you then dunk you in water and
figure out your volume and calculate from there.  It's hard to find
someone to do it, though.

Anyway, the more muscle and less visceral (abdominal fat, around the
organs) fat you have the better.

How is your waist measurement, and can you "pinch an inch" or more?

Don't starve yourself, eat enough protein to keep that muscle in good
shape, and continue to work out and the fat will be replaced with
muscle eventually.

Your BMI may not end up in the "optimally low" category but, in my
mind, if I had a choice between a higher BMI and more muscle and a
lower BMI with less muscle, I'd go with the higher/higher as long as I
was sure that what was increasing the BMI *was* truly muscle and not
fat.

Some books have ways of calculating % body fat by using a combo of
measurements, heights, and constants.  I think the Zone Diet book has
that in, as well as maybe Protein Power. I don't know how accurate that
is but it could be worth a look-see.

LQ