Hi Tarik,
You mention that you want to "convert a google earth screenshot of a street into a vector layer (Building edges) in ArcGIS", are you using Arc10? If so it maybe easier [and avoid legality issues with Google] to use the aerial imagery offered via ArcGIS Online and Bing Maps you'll find it as a pull down on the 'add data' button. If you can then you can have the aerial imagery on the user interface rather than having to; grab, crop, inport, georeference exported JPEGs or TIFFs.
If not you can export a google map via export under the file menu (if you have Google Earth Pro [where you pay a liscene fee]) or you can take a screen shot and edit that image (using photoshop or any image editing software [I am not sure if that is technically legal]). You will have to have a look for whether Arc can inport a KMZ (Google Earth file) directly [as I'm not sure off the top of my head].
When you mention about methods available in ArcGIS to draw lines over the underlying aerial photo you can just create a feature class and using the editing tools 'trace' the map, which is easy enough [you do this by starting a edit session and using the tools there].
If you are looking to automate the process you need to bear in mind that the raster to polygon tool (as you said you want to draw dwelling polygons) only really works with TIFF files at around 600dpi that have black and white content only.
I hope this helps.
