So there is certainly a trade-off here.
If your blood sugar is too high for too long it can damage just about every body system.
This study had some cool data:
http://www.ncbi.nlm.nih.gov/pubmed/18635428BLUE is low-carb
RED is low-fat
YELLOW is Mediterranean diet



Fasting glucose was about 91 at the beginning in about all groups, so low-carb diet doesn't seem to have any negative effect on fasting glucose.
Low-carb diet had positive effects on :
- Insulin resistance (lowered HOMA-IR)
- Adiponectin (inversely correlated with body fat percentage in adults, the more Adiponectin you have, the less fat you are)
- Fasting insulin (lower insulin levels reduce hunger)
- C-reactive protein (lower levels indicate lower levels of inflammation)