The route is a pretty poor outcome of special interests. I recall reading that the best engineering firms in the world said that we should essentially have a hub and spoke approach (i.e. you have a very straight high-speed line from LA to SF and then you have spurs that connect all of the small towns to that main pipe). Instead, the route curves around to get to every small town that wanted a whistle-stop.
I would personally love to see high-speed rail. SF->LA feels better to me but your observation that San Jose is connected to the bay area already and makes a great terminus is really good. Plus, I live in Oakland so I'd like it even more if it came right into my backyard :)