It IS dangerously low.
As a diabetic, any changes in diet you take should be watched by a doctor/specialist. Please make an appointment with your doctor to discuss how to lose the weight you want a healthy way.
I lost 40 pounds (and kept it off for several years) by taking it slowly, making sure I was watching my portion controls, eating a variety of fruits and vegetables, lean protein, high fibre foods. I still drank wine occasionally and I still worked a little bit of chocolate into every day of my (approximately) 1200 calories a day.
I'm not going to lie, a bit more weight than I would like has creeped back on, and I am starting working to get it off again. I am NOT going to have 500 calorie days, ever. As a short GG, my caloric burn is a lot smaller than that of an average sized GM to start - around 1900 calories vs. 2500 calories. No matter how big a person you are, though, it is not good to eat only 20% of what your body needs as fuel and expect your body to come up with the rest.