I'm putting an addition on my home. For a few reasons I won't go into, I don't have the room to put the floor joists & floor on top of the sill plate. Someone suggested a different method which is basically putting the floor "inside" the foundation with the subfloor at the same level as the top of the foundation. I've drawn a picture of what I think this should look like... see it at:
http://home.attbi.com/~meeker49/footer.JPG

A few questions:

1. Is this the correct way to do this? 2. Should the floor joists be resting on the "step"? If so, should I put a "sill plate" on that step? 3. Why does the plywood subfloor need to go out over the foundation? 4. Is a step even necessary?

If this is not correct, or if there's a better way, please let me know. I would appreciate any help... this has me a bit confused. Thanks!

You can hang the joists off the mudsill, special hangers are made just for this purpose. Run your plywood subfloor over the mudsill, you will have to cut out for the bolts in the sill.

The step you describe is NOT needed.