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In my view, you want to aim for a site that records zero hits on the site map page. If you manage that (assuming you actually get visitors to your site, of course), you can congratulate yourself on having devised the perfect site structure. Either that, or you've forgotten to link to the site map.
A site map doesn't have to link to literally every page, but it should reflect the way the site is organized in as simple and clear a layout as possible. Using nested lists is a simple strategy, effective for sites with not too many levels. Tables, making use of rowspan and colspan, is another approach -- you can use colour coding, as long as you create a logical system.
Labels should be accurate and concise. You need to find a way to include more information than you get with the site's standard navigation, but without overwhelming the visitor with TMI (Too Much Information). People usually resort to a site map when the navigation is unclear or confusing; the job of the site map is to de-confuse.
That prog generate a site map as well taking the page titles as list items.
It could be a starter...
However, you also mention not having to make all links within the map live. I would argue this point. We use sitemaps on a lot of our sites. Yes they are there if users get lost, however that is not our main reason for putting them there.
We know search engines love keywords, hyperlinks, hyperlinks that link to pages that are relevant to the link, etc etc etc.
We use the sitemap as a tool for search engines! Sitemaps contain loads of hyperlinks, keywords, descriptions and body text if needed. If produced well and put on your top directory with your index.html page, they can be a magnet for search engines.
Webboy
...if a visitor gets some benefit from it too, well thats a bonus :)
See, if your navigation is up to scratch, search engines will be able to spider it all with or without a site map. Just because you should aim for a sitemap with zero visits doesn't mean you'll ever achieve that, and it certainly doesn't give you an excuse to turn a sitemap into a bunch of links and keywords.
Being user-friendly is not an extra bonus, it is the primary requirement of a website. If you attract a million people to your site in one day, but fail to provide them with a clear and simple way to purchase what they want, you will have acheived nothing except a large bill for the extra bandwidth.
The main reason for having a sitemap is to help confused surfers. I don't know about you, but I, as a potential client, do not want to think that I am less important to you than a computer program.
Optimize your sites to help search engines by all means, but never sacrifice usability or your net gain will be zero.
