Due to a cast iron toilet flange that sticks up approximately 1" after old tile/mortar removal, I need to build up an underlayment. The subfloor is 3/4" plywood 16" oc. I am thinking about putting down a 5/8 layer of plywood and than 1/4 cement backerboard to get level with flange for tiling.
Is this acceptable? Also, with putting 1/8 to 1/4 " inch expansion gaps along
The walls for both the plywood and backerboard, How do I prevent grout from
Tiling going down the expansion gaps along the walls?

You can do what you want to do. Make sure you use thinset to adhear the cement board to the 5/8 then use the proper screws. Only thing is your flange will now be below your tile so a double wax ring or a flange extension may be needed. If you use 1/2 cement board then tile, your tile will be flush to the top of the toilet flange. Ideally your tile should be the same height as the flange.
As for the expansion gaps you want, install some caulking between the subfloors and the walls.

I am not sure you need to do much except clean up the old floor and make sure it is screwed down solid. If you are putting down ceramic tile, half of that inch will be taken up with the tile. The stool has a recess in it to accommodate the flange being slightly above the floor. Measure it. I would use the cement based floor lever Armstrong makes to make the area the stool sets on as level as possible, so it sits solidly on the tile. Tile over a level surface should give a level surface.

Tip:
Sometimes, if you are OK with a little rasing of the floor , you may lay a new tile over old tile. Just clean old tile well, scrach it using a grinder and add cement addhesive(sold in hardware store) in the thinset mix.