I just started taking up the carpet from the dining area and the vinyl flooring from the kitchen prior to installing hardwood floors and needed some help with these questions:
1. The vinyl flooring is a 1/8" higher than the plywood subfloor. Should I take the vinyl and 1/8" subfloor out or try to level this area with the adjacent area?
2. I noticed that water has probably been filtrating through an exterior door jamb and window sill for the past 5 years since we bought our home. The subfloor is not rotted but has signs of damage in some areas (dark in many areas). Should I replace it? And should I install a vapor varrier to further protect the future hardwood floor from water penetration?
Regarding the water issue; it would be best to replace the subfloor and then put a waterproof membrane over the subfloor before placing the hardwood on top of it. Are you going to do a nail down or glue down? If a nail down, you want a membrane that even while penetrated with a nail, remains waterproof. Try http://www.protectowrap.com/products/flooring.php
Use the wispermat hw. If you are gluing, try Bostiks MVP to seal the concrete and BST or BEST to glue the flooring down.
Regarding the height difference, it would be easiet to take the tile up and level the entire subfloor at one height. This might take a little more prep work but in the end it will be worth it.