If it were easy for kids from Palo Alto to get into Stanford, Stanford would be full of kids from PA. In fact, only 36% of Stanford students are even from the state of CA. Top schools value geographic diversity in the admissions process, and the top applicants (in quantifiable areas like SAT score) are highly concentrated in a few areas. Moving to those areas will not help your kid get into a top school. If you want your high-SAT-score kids to get into Stanford, have them graduate from a random high school in Kansas.
Tech money is literally raining down on Stanford. The only thing left to upgrade on the campus is to line the gutters with platinum. Its sad given that San Jose State actually educates more local workers...but connections to Stanford are a real social network for some of these people.
And of course there is a decent college nearby, just sayin :)
(and to your point about moving to Cambridge to go to Harvard...sorry, but many of the techies -do- have ties to Stanford...and if your parents went to Stanford, you will be shortlisted when you apply...AND EVEN FURTHER, if your parents make a donation of a certain large amount, Stanford effectively pre-selects you, this has been communicated to people I know personally who have already made the donation in question...so yes, some of the residents can probably already start buying red sweaters)