I am interested in writing a simplistic navigation application as a pet project. After searching around for free map-data I have settled on the US Census Bureau TIGER 2007 Line
If you don't mind paying for a solution Safe Software produces a product called FME. This tool will help you translate data from any format to just about any other. Including KML the Google Earth Format or render it as a JPEG (or series of JPEGs). After converting the data you can embed google earth into your application using their API or just display the tiled images.
As a side not FME is a very powerful platform so while doing your translations you can add or remove parts of data that you don't necessarily need. Merge sources if you have more than one. Convert coordinates (I don't remember what exactly Google Earth uses). Store backups in a database. But seriously if your willing to shell out a few bucks you should look into this.
You can also create flags (much like in your sample map) which contain a location (where to put it) and other data/comments about the location. These flags come in many shapes and sizes.