Selling RSU below Settlement Price

No - you were taxed on $63,000 of income but had a capital loss of $34,000 that you should be able to claim on your 2011 taxes next year. That loss will reduce your overall taxable income, resulting in a large tax refund, assuming that your withholdings are accurate for your "normal" income and don't take the loss into account.

If you want, and can roughly estimate your tax burden based on your income, this loss, and any other deductions, you could reduce your W-4 witholdings so that you can realize that tax deduction during the year rather than having a large refund. You could roughly estimate the difference by multiplying the loss by what tax bracket you're in. For example, if you're in the 28% tax bracket, you could expect a tax reduction of about 9,529. If you have 20 paychecks (10 months) left in 2011 you could reduce your withholdings by about $476 per paycheck.

The risk is that you underestimate your total tax burden and end up underpaying. You could offset that by only reducing your withholding by about $400, still giving you a decent refund if you estimated correctly and, at worst, a smaller tax bill.