At the Google I/O 2009 new features of the Google API were introduced:
http://www.youtube.com/watch?v=H7fxHp7oHcI

Among others, the GoogleEarth Plugin was further developed. With this plugin, you can embed GoogleEarth contents in normal websites. With the help of the following Google Gadget, this is now pretty simple: http://tr.im/embedkml.

For the following very simple example, I used an overview of Canadian Universities. However, I also tried this technique with very large and complex kml files and it worked as well. The Google developer forum gives more information which features of GoogleEarth are included already and which are not.