The first thing to do here is to define a grid pattern. I used 5px squares, and I want every five lines to be heavier, so I made a new document with 25x25px, and drew four gray lines and one black in both planes. Remember to use a transparent background. Then define it as a pattern.
Now make a new layer above the original and fill it with your new grid pattern. Choose the Paint Bucket Fill Tool and select "Pattern" in the drop down, and use your new pattern. Then just click in the new empty layer to fill it with the pattern!
Next, you want to merge the grid layer and the original image layer.
You could be satisfied here, but I am not. I once wanted to make a pattern out of a grayscale image using black, white and two shades of grey, but the greys were to hard to tell apart, so next I will explain how to replace colors with representing symbols. (also I have no color printer)
Here is a good place to make a copy of your result. You will need it to identify the colors after they are replaced!
The first thing to do now is to define a few patterns to replace the colors with. They should be 5x5px and use only the top left 4x4 pixels, if you made the grid pattern the same as mine.
Next, make a new layer and place it behind the original image.
Fill this layer with one of your patterns.
Now, using the magic wand, select the color you want to replace (without Anti-alias, and with Tolerance 0 and non-Contiguous).
Clear the contents of the selection (delete/backspace) to let the pattern shine through.
Last but not least, you need to merge the two layers.
Now, repeat this with all the colors you need to replace and you are set!
If you want it to look better you could easily use bigger squares from start, and make a wider grid and symbols, but this is good enough for me.
That's all for now! Post your home made patterns in the comments so we can se what you do!
Get more of my ideas at my "craft, DIY and other ideas" blog!
Update: Here are two examples. The mario image has 5x5px square size and my complete bird montage pattern has 20x20px square size ( full size color, full size symbols)
Update 2: Here is a blog post with some finished embroideries I've made with these patterns.