These words have a common origin but different meanings. Earthly means "of or pertaining to the earth," "possible or conceivable in this world": "The travel folder claims that this resort is an earthly paradise." "Your help can be of no earthly use to me." Earthly is concerned with the earth, either literally or figuratively, and nearly always implies a contrast to that which is not of the earth, that is, heavenly. Earthy means "characteristic of earth or soil": "These roots have an earthy smell." Earthy also means "realistic," "practical," "coarse," and "unrefined": "His sense of humor is earthy." "His goals in life are earthy rather than idealistic."
Dictionary of problem words and expressions. Harry Shaw. 1975.