I should have measured but I didn't.

I had injuries all fall and winter that prevented me from exercising. Being inactive caused me to really put on some weight and lose strength. Since my knee surgery (2.5 months ago) I've been going to physical therapy 3 times a week, mostly to lift weights and do 10 - 20 minutes of cardio. I've regained a lot of strength but my weight loss efforts are painfully slow.

I'm looking for some reassurance here, I hope that the scale isn't budging because I'm replacing fat with muscle. But how much muscle can you put on?

Also, how do I lose actual weight? I need to take some pressure off my poor knee! But if I'm lifting and building muscle, my actual weight can't drop much, can it? My knee doesn't know the difference in excess weight from fat versus excess weight from muscle. Help!

Yes, when you first start exercizing, you can build muscle, and lose weight at the same time. Eventually, no you cannot do both at the same time. You can do one or the other.
Unless you have the testosterone levels of a man, you will never have to worry about building to much muscle. Low carb or not, in order to lose weight, you still need to burn more calories than you take in