Hey Matt,
To answer your questions, it is possible to build muslce and lose fat at the same time but your diet/nutrition and trianing/techinique needs to be of a very high quality.
The washboard asb, biceps, tripceps all those things you asked about, you can do all that in one go and its actually the best way to go about it

. FULL BODY WORKOUT. Start doing compound lifting excersises like :
Squats
Bent-over rows (barbell)
Bench press
Military press
Deadlift
Good mornings
Barbell Curl
Overhead press (barbell)
to name a few...
If you don't know what the heck these things are read up about them. They are the best way to target pretty much ALL the big muscle groups in the body and are the most effective way to build indivuidal muslces also.
I would suggest you do a full body workout 3 times a week with cardio in between for example:
Monday: Full-body workout
Tuesday: Cardio (riding a bike, running, stationary bikes, rowing machines etc)
Wednesday: Full-body workout
Thrusday: Cardio
Friday: Full-body workout
Saturday: Cardio
Sunday: Rest
Do 3 sets of 8 -10 reps of all the excerises progressivly overloading your muslces.
Now, to go along side your training you need to have a healthy diet.
Here is a part of a post by Wrangell i think is very educational.
______________________________________________________________
Simple, time-tested, no nonsense habits that you need to get into when designing a good eating program.
1. Eat every 2-3 hours, no matter what. You should eat between 5-8 meals per day.
2. Eat complete (containing all the essential amino acids), lean protein with each meal.
3. Eat fruits and/or vegetables with each food meal.
4. Ensure that your carbohydrate intake comes from fruits and vegetables. Exception: workout and post-workout drinks and meals.
5. Ensure that 25-35% of your energy intake comes from fat, with your fat intake split equally between saturates (e.g. animal fat), monounsaturates (e.g., olive oil), and polyunsaturates (e.g. flax oil, salmon oil).
6. Drink only non-calorie containing beverages, the best choices being water and green tea.
7. Eat mostly whole foods (except workout and post-workout drinks). "
...courtesy of John Berardi.
Now, armed with this info, all YOU have to do is find a list - Google is a good place to start - of foods that make up ...
- lean protein
- fruits and vegetables
- saturated fat & monounsaturated fat & polyunsaturatesd fat
- whole foods
____________________________________________________
To get the list of these foods go to the Nutrition part of the forum and look in the stickies at the top, there is one called LV's grocery list, have a look in there it gives a very comprehsive list of good foods to plan your diet.
It's a steep learnign curve but if you do these things result will come hard and fast. Ok that is all lol, sorry if this post is too big. GOOD LUCK and have fun with it!!
P.S i had the same problem you described with the upper ribs sticking out it disapeared with time.