Sounds like you are headed in the right direction even if the scale doesn't show it!
Technically, muscle does not weigh more than fat. A pound of fat and a pound of muscle weigh the same...a pound. But a pound of muscle takes up less space than a pound of fat and that is probably what you're seeing. Those inches lost are awesome! Besides, who knows what you weigh (besides you, no one) and who sees how you look (everyone)!
For example, I was really miffed when I got on the scale this morning and had gained half a pound...after a quarter of a pound yesterday. I have been diligent about what goes into my mouth and exercising daily. But I have a scale that measures body fat and a whole new lower number popped up after it displayed my weight. My body fat is two percentage points lower than it was a week ago. So I have to remind myself that it is not about having the lowest number on the scale; it's really about getting healthy...and more muscle and less fat equals healthy.
Keep it up and it will all fall into place!