The main problem with San Jose and the Peninsula is that it is just too expensive for average folks. So if you are a Stanford student, for example, you have to commute to school if you don't want to live on campus. San Jose State is a little better and you can find some relatively affordable apartments right around the San Jose campus. I don't know if this would be the funnest place to live, but it is at least affordable.
You might also consider going up into the East Bay and finding a place in Hayward or San Leandro. There is some relatively more affordable nightlife there.
