You can't restrict your calories too much or you won't have enough to live on. 1200 calories is not enough for most people. You need to calculate your actual calorie needs, based on your current height, weight, age and activity level.
Talk to your doctor about yoga -- it's moves are very low impact and you have to be aware of how you do them. Yoga centers on building core strength, breathing and relaxation. It can help you build muscle, lose weight and regain lost movement. You can get yoga dvd's relatively inexpensively at discount department stores, or google "yoga" and you can watch all types of videos, showing you how to do certain poses. Get your doctor's okay.
For diet, make sure you eat mostly veggies, and add in lean protein, low/no fat dairy, nuts, seeds and "good" fats. Portion control is the easiest way.
hypocaloric diet is the answer to your question. Eat maximum 1,200 calories per day.