Since this mashup looked so complete for iteration 2 I'm not suprised to find that not much has changed. At first glance I thought I was looking at the old version. I had to go back to the blogs to see what had been changed and upgraded. I thought it was a good scalability idea to put one marker per city and then put the list of names associated with that city in the bubble, since most users would probably have most of their friends in one or two cities. The only thing I would change with that would be to leave that bubble of names up after you click on it so in case you click the wrong name you don't have to close the wrong persons info bubble and reopen the city bubble. Other than that, you guys should start making some money of that site.
Good luck,
Mike