Those questions are impossible to answer without a TON more information like your weight, diet to date, diet composition to diet, how you tend to respond to changes in the macro makeup of your diet, your workout, etc. All you're going to get are general answers, so here's some generalities:
As far as diet goes, most people tend to go low carb when they want to lose fat while retaining as much muscle as possible. Using a ketogenic or targetted ketogenic diet is a common approach. Weight loss should be mild and slow, and like anything else in training you can do it until you either want to stop, or stop seeing benefits and plateau. Without chemical assistance you're likely going to retain enough water and fat that if you're expecting a cut a la Olympia you're in for a disappointment. Try dropping your carbs to below 80 grams a day and replace them with an equal (more or less) amount of protein intake. Eating more protein means you'll get a slight boost in your metabolism because it has more of a thermic effect than carbs or fat. That may be enough to start seeing some losses already, but it will short lived. At that point you'd have to progressively lower calories to keep gains coming. Do not lower them too much, do not overwork yourself or you'll stall. If you want to go extreme you can do a protein sparing muscle fast, which basically means other than a mineral and fatty acid supplement to stop you from going nuts and dying of rabbit poisoning, you eat nothing but lean protein for a while. You'll feel like hell and likely not be able to maintain the diet, but you can lose some serious fat that way while sparing muscle tissue.
