Warning, this is super long... You might not be losing water and muscle, and even if you are, you're probably losing fat, too. Meat is higher in fat than most plant-based foods, so cutting those out will make a difference. I've lost weight since becoming vegetarian, but I've also been hard-coring it at the gym, so I'm not sure which caused it (probably both). I would say that as long as you're eating healthfully, don't worry too much about where the lost weight is coming from. You're not too likely to gain it back as long as you continue eating healthful foods.
A little weight loss/gain/maintenance info: If your daily calorie intake has dropped significantly (which is probably has), you will lose weight quickly at first but it will then taper off. The less you weigh, the fewer calories your body needs per day to function. (to lose a pound a week, you want to eat an average of 500 cal less per day than you burn). Say I weighed 140lbs and am moderately active, and to maintain that weight I need 2100 cal per day (these are my numbers). If I burn 2100 per day through exercise and just general existence (walking around, talking, fidgeting, breathing, digesting, etc) and eat 2100 per day, I won't gain or lose weight. If I suddenly drop to 1500 cal per day in, my body will steal those extra 600 calories from other parts of me (depending on your body it could be from muscle, fat, or both). As I lose weight, though, my body has less cells to feed and therefore needs fewer calories. So, say I drop to 130lbs, and my body only needs 2000 cal per day to maintain its weight now. Now my deficit is only 500 cal per day less in than out. That's only 100 less than before, but that will slow down the weight loss a bit. As I drop farther down (though I probably won't go below that weight honestly), my deficit will get smaller. Say I drop to 120lbs, now my body only needs 1900 cal to function, so my deficit is 400... at 110 I need 1800 and the deficit is 300... etc. You get my drift.
The general point here is weight loss will taper off as your weight drops, and as long as your daily calories in are more or less equal to calories out, your weight will stay pretty stable.
If you want to check out this link http://walking.about.com/cs/calories/l/blcalcalc.htm
, you can put in height, weight, age and activity level and it will tell you what you probably burn on an average day. Then, if you figure out more or less how many calories you eat, you'll see what the in vs out difference is.
Also, normally you don't want to lose more than 1-2 lbs per week, so I would check to make sure you're getting enough calories. If you're not but don't want to eat more, try choosing slightly higher-calorie foods. That will slow the process down a little. It's recommended for women not to drop below 1200 calories per day.