I had a blood test done a couple of weeks ago, and almost everything is OK, except for my cholesterol. The overall number was fine, but bad cholesterol was too high, good cholesterol was too low. My doctor gave me the option of getting on medication now, or giving the diet more time and starting to exercise. I chose the latter option, because I definitely don't want any MORE medicines! And the numbers weren't WAY off, just a bit. But I'm really worried that it will hinder my weight loss. I really haven't exercised at all for quite a while. I do know that I'm supposed to eat an extra protein packet when I exercise.
Have others added exercise while in the middle of phase 1? What should I expect in terms of my weight loss stalling?

If you've never been a big exerciser - ANY little bit of movement is going to be helpful for you. And if you do something that does not allow you to get out of breath (for example, take a slow walk for 15 minutes, increasing slowly each day to 30 minutes) and remember to have an extra packet within 1/2 hour of finishing. "Exercise" doesn't have to be intense to be effective. When the school year started in September (I started IP in July) I suddenly had to walk 1 mile twice a day to get my kindergartener to and from school. We took slow walks, and I added a HB egg after getting home from the morning dropoff and an extra shake after getting home from the afternoon pickup. My losses didn't change at all.

With low carb eating LDL may go up. There is said to be a shift from smaller (bad) to larger LDL particles on a low carb diet. You can test for particle size, but most doctors are not likely to do it without asking. Your triglycerides should go down if you do not eat predominantly saturated fat. HDL should increase slowly.

I have restarted exercise after a 5-6 weeks break after starting IP. Once you are ketoadapted (3-4 weeks), you should be fine as long as you stay below 65% of your maximum heart rate. Above that, muscle protein may be cannibalized. I did only toning while on IP. It is interesting, as your body feels different while on low carb. Less lactate production, so no aching aftermath. But I found I had to take potassium and magnesium supplements and be careful to avoid cramping. Since you did nothing much before, start slow and low-impact as you will not build muscle on the few calories you get. I personally could not be without working out.

I was going to say I was told even just walking more will help get your numbers where you want them to be.