Hi there and welcome to ADBB
In regards to the weight you have lost so far, yes that part is very real and will continue to be so as long as you stick to what Dr. A says in his book.
Everyone has different results don't get me wrong, but some have really awesome results and that sounds like where you're at right now. Congrats on the 12lbs lost
A couple of other VERY helpful tools for your journey if you're not already doing them, is to read Dr. Atkins book, take your measurements weekly or monthly, and take pictures of yourself through this awesome journey you're now on. The book will answer so many of the questions that you will have along the way, taking your measurements definitely helps for the times the scale isn't being quite so generous as it can show inches pouring off still, and the pictures will help you to see the changes taking place in your body even when you don't see them by looking in the mirror.
When you're feeling ready, have a look at the challenge page, and see if there isn't one you might like to try. It helps to make one feel accountable, and sometimes god knows, we need the extra help.
I'm sorry that I can't offer you advise on the diabetic part of your post, but I do know Dr. Atkins and many others have claimed that Atkins can heal your body in ways seemed to be unattainable before. There are many truly great story's that have come from people doing Atkins.
I wish you all the luck in the world with your journey, and look forward to seeing your progress along the way.