You're not wrong about the expression. "Double or nothing" means doubling or canceling the existing debt. In this case, the $3200 Kramer has already lost betting on airport arrivals would either become nothing if he wins the next bet or $6400 if he loses. (Within the show itself, he wouldn't've actually paid that amount even if he had lost: he would've forfeited his collateral, a valuable bag of mail that Newman had previously stolen from David Berkowitz's route.)
You're wrong about two different aspects of the episode itself. First, there's a time skip.
Earl: I should've quit at double or nothing.
That is, he didn't quit at the double or nothing bet on the Ithaca plane arrival. He continued to bet (and lose) off camera. Second, Kramer doesn't walk away with anything. Because Elaine shows up and reveals that Kramer's friend Jerry was personally responsible for the late Ithaca plane that got Kramer out of his hole, Earl Hafler refuses to pay for his own loses (which he had begun doing in traveler's checks, rather than with an actual check).
In other words, the bet ends up finishing at "nothing" after all.