I dropped over 30 pounds by taking up running. To be honest, at first I hated it, and only did it because my girlfriend embarrassed me into it. Now, a couple of years and several marathons later, I can't imagine not running. It just makes everything else so much easier.
Start slowly, by alternately walking for one minute then running for one minute. Go out three times a week, for maybe 20 minutes at the most. After two weeks of this, try running for two minutes, and walking for one. When that becomes fairly easy, stretch it out to three minutes of running, one minute of walking. Then four minutes of running, then five ... you get the idea. Take it slow and easy, but before you know it you'll be running for kilometres, not minutes.
You will NOT trash your knees or ankles by running, provided you have proper shoes. That's the only real investment you will need to make, but it's essential. Go to a proper running store, like Running Room, and they will check out your biomechanics by having you walk and run barefoot in the store while they observe your feet. They can then sell you shoes that will work properly with your particular gait. Good running shoes will cost $100 - $140, and will last about six months. After that, they're still fine for wearing to the mall (or fishing), but you'll be best to replace them for running.
Running on a treadmill is good, but running outside is MUCH better. The momentum of the belt makes it far easier to run on a treadmill than to run on the street. For best results, run outside.
Stores like Running Room have clinics you can join, which provide instruction, coaching tips, and company - it's hard to blow off a run if you have people expecting to see you. The clinics work, and you'll have more success by joining one than you will have on your own. Trust me on this.
Finally, before you start any exercise program, talk to the doctor and make sure you have the green light to proceed. And remember, the trick is to take it slow and gentle, especially if you've been sedentary for a while. Your muscles will adapt to the new routine really quickly, and you'll feel like you want to go farther or faster. But it takes a lot longer for soft tissues like tendons and ligaments to adapt, so you have to give them time to catch up.
Good luck!