The Palo Alto Baking Company is the best bakery I've found down on the Peninsula. They specialize in pasteries and cakes. I'm not sure if they do bread as well. On an absolute scale I'd say they rank a 3.5 out of 5. Behind the counter, you'll find an older, profesional wait staff.
Location: California Ave, Palo Alto (just a few blocks from CalTrain)
Hours: Open early, closes early (maybe 6am to 4 or 5 pm?)
Oddly enough, while I can reommend several great bakeries in nearby communities, I can't think of a standout in San Francisco (where I live). If you're into Italian bakeries, you might try Dianda's (on Greenwich in North Beach, and on Mission near 25th). Beyond that, I'm stumped.
In the East Bay, I love Grace Baking (in Oakland, by Rockridge BART) and the Bread Garden (in Berkeley, on Domingo right across from the Claremont). In Point Reyes Station, I'm very fond of the Bovine Bakery.