The FAQ confirms that Google Earth’s native KML and KMZ file formats will be supported by ArcGIS Explorer, but there is one question I have yet to see answered:
Will ArcGIS Explorer do network links?
This matters, because while deploying KML files, it is often easier to hand people a network link which then fetches the actual updatable file. If ArcGIS Explorer were to only support the rendering of KML, and not the network link functionality, then we’d have a problem: Would we then be more likely to shun the use of network links when we author KML? Or would we produce different versions for different geobrowsers? Today’s HTML and CSS producers face similar dilemmas.
(This is a purely speculative post, but perhaps somebody who’s actually used a recent version of ArcGIS Explorer could answer this question definitively? My hunch is that only the geometry component of KML will be supported by ESRI.)