Planning to install 3/4" x 2 1/4", 't&g' oak hardwood flooring in a living room that is part exisiting hardwood and part plywood subfloor. (There was an addition put on the house and the previous owner decided to just carpet everything instead of extending the existing hardwood to fill the new space.) Instead of removing the subfloor and existing hardwood, we're planning on simply installing new hardwood over everything. Both the plywood and hardwood are quite flat except that where they meet, there are a few slight variations in height of about 1/8". (In some spots, the hardwood is higher and in others the plywood is higher, but none too extreme.)

Planning on putting down two layers of underlayment: 1/8" luan and then 20 lb. felt.

It seems that it is standard practice to lay 1/4" luan for underlayment, but since I had access to some leftover 1/8" luan for free (not enough for two layers though), I was going to use that instead.

Is 1/8" luan too thin? Should I spend the $$$ and get the 1/4" instead?

Also, is this type of wood underlayment going to solve the height variation issue I'm having at the seam between the plywood subfloor and the existing hardwood floor or is a 1/8" variation too big? Should I plan to float some joint compund to even it out before laying down the luan?

No one uses luan anymore. Spend the bucks and buy some plywood. Also in smaller voids just use some roofing tiles and or felt.

What about OSB?

Can I get by on less than 1/4" underlayment (regardless of the material)? Floor heights in adjoining rooms and existing baseboard moldings that cannot be removed for reasons ancillary to the project are of concern.

Is not using luan "because no one uses luan anymore" a good enough reason to go with plywood or are there concerns over the integrity of the product as well?