It really depends on your overall goals.
I was basically in the same position last fall, though I started at about 190. I didn't like how much muscle I had lost, and realized I'd look far too skinny if I kept losing. So I stopped, and took 4 months to add more weight, up to about 180. I then started cutting again. I still look too skinny, but definitely better than I did.
In my case, I was initially concerned far too much with just losing "weight". The last time around, I tried losing at a much slower rate, and tracked my BF% to make sure I was losing mostly fat.
It may help you to take a break from dieting, then start back up. You need to look at this as a long-term process.
In the end, though, I agree with the others. You need to lose the fat. I'd also look at doing Intervals instead of straight cardio.