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I've done a bit more research and pulled up the old chipboard flooring and found several layers of polystyrene underneath. I understand from reading these posts I can lay sand/cement screed directly on the polystyrene, as long as there is still 65mm for screed. This sounds ideal, saves a lot...

What did you do in the end, I have similar situation. What is the drawback of not have any insulation under the floor, instead just 120mm of screed. I realise the floor will be cold, but heat rises right, so it won't drain the heat from the room and I have a pair of slippers !