I'm over 50, but at less weight. Even at your weight and with bad knees you could do cycling. It is a non-weight bearing exercise and does not have the pounding on the knees that running does. My knees actually feel much better when I cycle than when I don't. Just start at 15 minutes and go up from there depending upon how you feel.

As far as eating, Atkins is not a calorie restricted plan. In his book, he recommends eating a low carb snack if you get hungry between meals.