The minimum you need is a table of placenames, with longitudes and latitudes in digital degrees. I downloaded my database from the GEOnet Names Server (GNS), unzipped the txt file (I think it was comma or tab-delimited) and opened it in Excel, then used Word to mailmerge the data into a Word mailmerge template. The template was a plain vanilla copy of a kml file with merge fields for the placename and long/lat data. I recommend you remove the <View> related tags if you have a lot of points: they seem to specify how to position Keyhole to look at your point from some direction other than straight down. I found using the following:
<Point>
<coordinates>LONG,LAT,ELEV</coordinates>
</Point>
to be sufficient. I left ELEV at 0; Keyhole seems to move the point up to the correct elevation algorithmically when terrain is turned on, but I haven't tested that assumption.

There is lots of very useful information in the GNS datafiles; native and variant spellings of geographical names, a NIMA feature classification and designator field, country and language codes, etc. The GNS main menu page has links to lookup tables for these.

I quickly abandoned Word and moved to Access to manage all that data, imported the downloaded GNS txt file into an Access table, then used queries to extract the information I wanted (for example, you probably won't want variant spellings). Finally it was just a matter of creating a report in Access to generate the surrounding xml tags, exporting the report, renaming it with the kml file extension and opening it in Keyhole. Voila! Thousands of points that will slow your refresh down to a crawl.

I plan to create separate kml files for different NIMA features: for example hydrographic points will have blue text, and topographic in green. Mountains will have little mountain peak icons, etc. Cities will have an icon scale factor related to their population, if I can find the population data.

Plotting geographic points is easy; now I'm hunting for more interesting data to add to my database. URLs to put in the description tags or city map overlays for the major administrative centers. A challenging task will be turning ESRI shp files into a series of coordinates that are needed for filled-poly rendering. I beleive the kml format continues to change and new features are being revealed (added?), so it may be a while before there is a standard to describe. Once it is described, however, we will the begin to see some conversion tools appearing. I'm excited by the possibility of using Keyhole as a full-fledged GIS interface. It may not be what it was designed for, but it's such an intuitive front end, and Keyhole's commitment to xml points to a very exciting future where everyone can contribute data. I couldn't program my way out of a paper bag, and I am definitely not a computer whiz. But anyone familiar with html can understand xml, and fiddling around with some of PenguinOpus' kml attachments gives one many examples of what's possible.

I hope that helps to answer your question. I won't be able to answer any others until the new year. I am leaving for Beijing on Sunday and haven't started to pack, and I have two lectures to write (plus all my Christmas shopping to do) before I leave. Yikes. I've been spending way too much time around here