BTW: the thing that has me floored is that the offer would be jaw-droppingly good anywhere else, but has me wondering if it's worth it in the Bay Area. Your real estate costs are mind-numbingly insane. In the long term something has to be done about this or employers are going to start fleeing the area in search of reasonable wage environments, because employees in the valley have to ask for at least 50% higher wages simply to break even with other places.
What are your thoughts on east bay: Newark and Fremont and such?
Speaking of South San Jose, that's where I last lived (before leaving the area) and commuted all the way to Palo Alto every day. It wasn't so bad back in the 80's (around 30 minutes) but I have no idea what it's like now. Maybe it's better!
I have a sister who still lives there and is a top-notch real-estate agent. I'm sure she'd be happy to help with any questions. Let me know if you need her number.
If your a morning person, look at Livermore - long commute but if you hit the commute early you will be fine.
Also look at Halfmoon bay on the coast, another long commute but REALLY nice coastal town, As long as your on the road by 6:30am you will be OK
I live mid peninsula - meaning Belmont, and know the area around me pretty well after living here some 25+ years.
Foster city is pretty kid friendly and a bit cheaper, but be prepared for finding a place to be a challenge in general.
The commute to MV by car can be a nightmare depending on time of day, you may consider taking the train to MV and biking to the office.
Redwood city and Menlo park are also options, but neighborhoods in these areas area a lot like New York City, a block or two can be a HUGE difference in neighbors and whether or not you will feel comfortable.