For most people, though, isn't living in that expensive environment a significant boost to their ability to earn at a level required to achieve that net worth? Not just San Fran, but any urban environment as opposed to, say, a rural environment.

This suggests possibly massive disruption in wealth structure once augmented reality puts remote interaction on par with local interaction. If your day-to-day expenses are significantly more decoupled from your income how will spending patterns in the top 5% change? Would luxury spending increase, or perhaps individuals would be able to invest more and retire earlier?

First, yes. Like many other investments of capital, (such as research) it provides economic opportunities.

Second, absolutely yes. This has been the dream of telecommuting for, what, a decade? But rather than increasing discretionary income, remember that perfect telecommuting brings with it increased competition, which drives down compensation. So you would probably not see 2014 San Francisco tech salaries being paid to all those remote workers. A real part of today's high SV salaries is simple cost-of-living adjustment that would be unnecessary with remote hires in Nowhere, USA.

That assumes no adjustment in earnings, though. What will the labor supply/demand curve look like when you don't have to live in SV?