Hi Emma, the initial weight loss is indeed mostly water weight - when we eat carbs we tend to retain water - reduce carbs, the retained water goes, this is exactly as it should be.
Signs of ketosis are hard to read. Diastix and ketostix will both show ketones, people usually get ketostix because they are usually cheaper.
Lots of reasons why you might not be showing any colour on the sticks. First, are you testing first thing in the morning, that is when the reading will be highest and that is when you should check. Second if you are drinking lots of water, the ketones can end up very diluted and so you don't get a positive reading. Also, the body does use ketones for energy, sometimes all the ketones are used up so you won't see any in the test.
Finally, there are two sorts of ketones that our body can produce. The sticks test for only one sort. There is a very small percentage of the population who only produce the other sort, so won't ever see a positive result on the sticks.
Best thing really is not to worry about it. Make sure you are eating sensible portion sizes, make sure you are eating the right amounts of veg, and make sure you are getting enough fat. MFP is very useful for this. You are aiming for 65/30/5% of calories from fat/protein/carbs. Also make sure that you are not getting any hidden carbs - for instance have worked out that one not very big dollop of HP sauce was 2.5 grams of carb, bit of a surprise that.
Have you got a copy of New Atkins New You ? - it is all in there, I've found it very helpful.
