I'm with Phate in that you cannot put on muscle at the same time as losing fat, although the newbie phenomenon is usually over by the time someone realizes what it is.
However i don't think weight is such a bad thing to go off for mr average joe; especially as many simply don't have the capabilities to regularly figure out body fat %, and the magic machines in gyms are so inaccurate they're no use.
Anyway, back to topic... weight is not a measurement of fitness, and its also dependent on what you class fitness as.