The object is bound together by electromagnetic forces, and the local group is bound together by gravity. These forces are much stronger than the expansion of the universe (cosmological constant), but the expansion of the universe manifests as a tiny tiny outward pressure term (too small for us to detect). It makes every atom/orbit a little bigger by changing the equilibrium point, but they don't to grow in size because the force isn't increasing.

If the cosmological constant were much larger than it is, atoms would have never formed at all.

I think you are using a concept of space-time that is quite limited. You are at most using concepts from Einstein's Special Relativity. Everything changed with General Relativity.

Space is not "created", space-time is warped. Gravity is the deformation of space-time by mass/energy. The distance from point A to point B is measured by the time it takes for a light ray to get from A to B using the shortest path. But if you move objects with mass (or with energy) near A and B, the shortest path will change. Also, it's easy to measure distance in seconds when you know the speed of light.