You've gained muscle and lost abdominal fat (both visceral and subcutaneous, probably). If you don't want to continue to bulk your thighs, you probably shouldn't do too many exercises that target your quads.

Eating paleo makes most people leaner very quickly, especially men, and all the protein and a healthy metabolic state makes it easy to build some muscle. I tend to be lean and muscular naturally, for a girl, but when I started paleo I gained visible/noticeable muscle - and I wasn't working out at all at the time.

Just to corroborate your experience, some months ago i went out to buy a new pair of pants. Surprise surprise, when i tried them, it felt a bit loosely on the waist-line, and tight in the quads. I went home, well satisfied. I've droped one size and in the same taime my quads were bigger. I called it the "paleo-squat conundrum". ahaha

depends on where you were when you started, what your age is and what your primary foods are. It could have shifted typical abdominal deposit to other body areas as it is insulin/esp fructose that like to lay it down in the abdominal area. That is my "theory".

It sounds like a good thing.

I do know that gut fat is associated with a raft of diseases.

I need to read up on it more, but being influenced by fructose intake (sugars), and omega 6s - both of which put a strain on the liver which is responsible for storing fat, it stands to reason if you eat more natural/paleo, your excess calories will be stored subcutaneous (under the skin), as opposed to in your belly region, like it does when you eat glucose (subcutaneous) versus fructose (belly fat)...

Its certainly healthier when its not accumulating around your organs anyway, but why its on your thighs, i dont know enough to guess.

insulin sensitivity. The more insulin sensitive you keep your muscles by exercising them regularly and eating a well balanced diet, the more your body favors muscle mass over fat mass.

Actually, I guess ultimately it would be a combination of diet, stress reduction, and exercise because together the three create a favorable hormonal balance and greater insulin sensitivity within your muscle cells.