I work out in California quite a lot (just came back from spending most of December there).
Not got much experience of Palo Alto, but know the neighbouring areas quite well.
Northern Cali is significantly different from Southern Cali (e.g. San Diego).
Although the weather in Palo Alto is going to be much better than San Francisco, it's still not going to be like the constant indian summer of San Diego etc.
In terms of location for outdoor sports - N Cali is superior IMO. If you like surfing then Southern California wins, but for everything else I prefer the North.
As for accommodation, I can't speak for Palo Alto itself....but the San Francisco area is SUPER expensive.
Work/life balance will depend on your area of work, but for my firm the guys work longer hours and get less holidays, there is a very strong work ethic.
You'll find it easier to fit in with San Francisco types than LA or San Diego, it's much more "european" in terms of policitcal and social views. The first 6 months will be the hardest, although they speak (almost) the same language, the cultural differences are far greater than most people appreciate.
That said, the San Francisco area is one of my favourite places in the US, so much so that I'm currently in talks for a 1 year secondment out there.
You'll love it, trust me. Just give yourself a bit longer than you think you'll need to "fit in". There are not many places I'd rather be.
Oh yeah, the one thing that sucks.......nightlife. Everything closes at 2am and the music/clubs are dire. But just have a few beers and charm the californian girls with your accent.... you won't need to spend longer than 30 mins in a nightclub
Plus, California is actually pretty good for proper beer now, so don't be fooled by the Coors/Bud stereotype. You'll be spoilt for choice for good beers and even better Napa wines.