The main difference between phase I and phase II is that now we r adding in starches, dairy and fruits. We add either fruit, dairy or starch to the meals. My question is can I add Orginal Cherrios (Yellow Box) as my starch in the morning w/ low fat milk?

First of all dairy is a Phase I food. Have you read a newer South Beach book or checked the food list sticky here?

On the question of Cheerios, the ingredients list Corn Starch and sugar as the 2nd & 3rd ingredients and the fiber is only 3 Gms per serving. Not very filling and questionable ingredients. From the FAQ sticky:

(Cereals)COLD: choose low sugar with 5g or more fiber per serving

This list may be helpful that I found on an older thread:

Cold Cereals (with suggested serving sizes):
Uncle Sam Cereal (1 cup)
Kellogg's All Bran Original (1/2 cup)
Post Shredded Wheat & Bran (1 1/4 cup)
Kellogg's All Bran Extra Fiber (1/2 cup)
Post Bran Buds (1/3 cup)
Post 100% Bran Cereal (1/3 cup)
General Mills Fiber One (1/2 cup)
Kashi Good Friends (3/4 cup)
Kashi GoLean (3/4 cup)

Hope this helps!

I purchased 2 new cereals when I started P2. I, personally, don't eat cereal for breakfast. I'd much rather save my carbs for lunch or dinner. I actually will have a bit of cereal with my lunch every once in a while.

Hot-Old Wessex LTD -100% Whole Grain Cereal
Cold-Food For Life-Ezekiel Sprouted Whole Grain Cereal w/Almonds

It's definitely a learning process to start reading labels, because many companies are doing everything possible to lead us to believe we are eating a healthier product then they are actually providing.

Good luck finding something that works for you.
ETA-I sometimes stash my healthier stuff from my DH who ought to be renamed Capt. Crunch. He eats anything and everything.