I do not think they are talking of an expansion gap between the plywood and existing floor but a gap around the edges against the wall or skirting board usually about 10mm. You need to use plenty of screws to hold the plywood to the existing floor every 150mm if it was being tiled, you may get away with more spacing under wood flooring. I would not put underlay between plywood and existing floor as it will affect how tight the screws will hold the ply which needs to be tight to the floor to take out any movement.

Richard