The muscle/ fat thing is another red herring, I went through that period when I would gain weight whilst working out loads, and blame it on additional muscle, B.S. Now I've gone from around 35% to 12% body fat, and my weight is a low as it's ever been, but I have one hell of a lot more muscle, or at least much more strength.
But to build muscle, it's essential to have good nutrition, so what worked best for me was when my P.T put me on a plan where I was on 2,500 calories, spread throughout the day. Think it was roughly 100 grams protein, 70 grams carbs, and 50 grams green vegetables per serving, x 6 per day. Never hungry, performance and strength increased massively. Try doing that with calorie deficit. He's an elite athletics coach, and although I'm only a 'veteran', the body still works the same!
Now the only caveat on all of this, is that I was training for strength rather than endurance, so there may be a very different profile to ideal diets for cyclists, but the principles about balanced nutrition still apply, as do the facts about calorie deficit. Here's a good article which explains why, since I'm clearly failing to!
http://charlotteord.blogspot.co.uk/2013/03/the-500-calorie-deficit-myth.html