It's perfectly normal for your strength to decrease slightly when on a calorie restricted diet.
You aren't loosing muscle or anything like that, you are just simply going into your workouts with your tank half full. You aren't going to have the same strength and endurance as if you were going into your workouts fully fuelled.
It's the price you have to pay to loose body fat. In order to loose body fat, you can't be consuming a large amount of energy because your body will have to tap into body fat stores then to fuel your workouts.
As long as you are maintaining a high protein diet, you won't loose any muscle. A protein supplement is not essential but it's an easy and cost effective whey to meet your daily protein requirements.
For a whey protein - you want to see nothing but that in the ingredients list. Whey protein, natural flavours, a natural calorie free sweetener like stevia and then maybe some salt, soy lechitin and cocoa powder. There are a lot of good products on the market. I personally use isolation from n2bm.com. A good whey isolate should be pretty much fat and carb free. Isolation has 26g protein, 1g carb, 0g fat per 30g scoop.