Sorry, I forgot to come back. Here is some info from my book on the role of fat in the diet. The book is "The Essential Guide to Fitness, for the fitness instructor.

Fats can be ingested in the form of saturated and unsaturated fats. Saturated fats can be found in animal products such as meat and dairy food. Unsaturated fats can be found in seeds, nuts and oils. Fats are broken down to fatty acids and monoglycerides. These are then transported in the lymph system in the form of triglycerides. Cholesterol is found in egg yolk and meats and it's consumption should be minimised. It is not used for energy, but rather as a component of cell membranes.
The body requires some fat to maintain health. Some vitamins (A and D) are classified as fat-soluble vitamins because they rely on fat to function properly. In addition, fat is required as an essential component of the protective barrier of the nervous system and all cell membranes. Subcutaneous fat in the adipose tisue can insulate and protect the body and also serve as a fuel reserve.
Fat consumption should generally contribute to approximately 30% of adily KJ intake with no more than approximately 10% from saturated fats. Diets high in saturated fat in particular are associated with the development of heart disease.
Cholesterol is a substance made predominantly by the liver with the rest coming from the diet. Cholesterol is lost from the body in faeces. Triglycerides and cholesterol are insoluble in water and therefore need a transport mechanism to get around the blood. They are transported in bodily fluids bound to small lipid-protein complexes called lipoproteins. Lipoproteins come in different densities and therefor have different names: high-density lipoproteins (HDLs), low-density lipoproteins (LDLs) and very low-density lipoproteins (VLDLs). The LDLs transport cholseterol to the peripheral tissues and also regulate the production of cholesterol. The HDLs transport cholesterol from the peripheral tissues to to the liver to be broken down. High HDL levels are favourable because the cholesterol is transported to the liver to be broken down. High LDL levels are unfavourable as cholesterol deposits can start to accumulate in the artery walls.

So from all that I have two questions that I want to know the answers to,
1. If cholesterol is predominantly made in the liver then do we actually need the extra that is brought in from the diet?
2. How do we regulate or change our levels of HDLs and LDLs?

Phew, my arms ache!

Hope this help clear up some misconceptions that we should eliminate all fat from the diet. And also why diets like the "Atkins Diet" aren't recommended.