I found this good info from Covert Bailey (who I highly respect):
Proponents of the exercise before eating theory believe that glycogen stores have been depleted overnight, which enables fat to be tapped faster and more effectively.
The idea that fat will be burned if sugar is low seems to make sense but it doesn't work that way. There's a well-known phrase in physiology textbooks, which states, "Fat is burned in the flame of carbohydrate." In other words, you always need a little sugar in order to burn fat. If sugar is too low, the body doesn't convert to fat burning, it converts to protein burning.
We see this clearly in marathon runners during the last five or six miles of their 26-mile race. They've used up their glycogen (sugar) stores and their bodies start burning amino acids (protein) like crazy. So if you happen to have low glycogen in the morning, you're more likely to burn valuable protein (which comes primarily from the breakdown of muscle tissue) than to burn extra fat.
Now, to make my answer even more confusing, note that in the last sentence, I said IF you have low glycogen. In actuality, your glycogen stores are probably just fine in the morning. Remember, glycogen is stored in muscles and you don't do much muscle activity when you sleep. The sugar that might be low in the morning is your blood sugar. If your blood sugar were low, the result of exercise would be the same; that is, you would probably burn up protein rather than a lot of fat. For this reason, it's a good idea to drink a little orange juice to elevate blood sugar before you exercise first thing in the morning.
