I am going through the book for the expansion now and nothing is mentioned as to where the players and their initial settlements go.
Can anyone provide some insight to that?
It's on page 4-5 of the expansion booklet. Essentially it is a 30 hex island instead of the old 19 hex island. i.e. Instead of rows of size 3-4-5-4-3 it is 3-4-5-6-5-4-3. Initial placement is same as the basic game, except there is no predetermined setup, instead you must pick you own sites in order. (ie. setup is per "Settlers almanac" page 13, not "Beginners setup" in the "Settlers almanac" page 16.
My page numbers is from the Mayfair third edition.
Edit: Just had to add a Sauron smiley for fun.