A few things to add:
Tap water is good. Buy a faucet filter or a filtered pitcher if you're worried, but in general, city-supplied water goes through extensive filters and quality control to get to you.
In P2 you are still eating a lot of veggies. If in P1 you were eating way more than the 4.5c minimum then yes, in P2 you will probably start substituting some of those extra veggies with fruits/starches. But if you were just eating the 4.5c minimum, you should STILL keep eating that so your cost won't really drop that much.
Farmer's markets often have higher quality, locally sourced veggies but they are likely not going to be cheaper than shopping sales in the major grocery chains.
Learn what is in season (and therefore on sale) and buy (and cook!) accordingly. Apples in the winter, berries in the summer. Broccoli/cauli/carrots in the winter, etc.
Look at the sales flyers for your local grocery stores each week and shop by the sales, not by rigid meal plans. Plan your meals around what's on sale.
Get into couponing! Yes, you CAN coupon for SB-friendly foods! Yes, there ARE coupons for meat, dairy, fresh produce, whole grain items, etc. I am a crazy couponer and while it is easy to go off the deep end so to speak, you can save ridiculous amounts of money on good stuff too. Also, the most massive savings with coupon shopping is on toiletries/home goods so you can save signifcant amounts on those items, freeing more budget money for good meat and fresh produce. I like to use http://www.forthemommas.com
and [url]couponconnectionsnw.com[/url] to help me find coupon matchups for some major grocery stores. They take a lot of the work out of it!
I am a single woman and my entire grocery/household item/pet food budget is ~$150/mo (or less) This includes a pretty good amount of fresh fruits and veggies. SB can be done affordably without sacrificing taste or quality!