I live in San Francisco ("the City"), and I'm a huge fan of the place. And the previous posts are right about there be more social life, by far, in SF. But given your situation, I would think carefully about Mountain View. There's so much talent down in the valley. The city tends to be younger and more design-centric. And Mountain View or one of the towns near it is certainly far cheaper.

Also, it depends a lot on you what your start up ideas involve. I would look at the Peninsula like an OSI 7-layer stack. San Jose and the South Bay are the lower layers, and then as you move north, you work your way into the higher layers. There is a definite clustering of expertise anchored by a a few big companies in each area. Core networking and silicon bending are done in San Jose by Intel, AMAT, Nat Semi., Layer 2-3 are down close by with Cisco. Mtn. View, Palo Alto, and San have some great middleware and web software - Google, Yahoo, Oracle. Then SF is a lot of UI and Application layer work. To be fair, the city is attracting a whole new wave of start-ups. And my OSI model has all kinds of glitches (like Apple being so far south). but I still think its a good guide line. If you're doing something similar to what Google does, it might make sense to be physically close to them. And I'll say it again, the South Bay is much cheaper.