Non-stop. Yes, SFO is a hassle, but no more so than changing planes would be. A non-stop is one less thing to worry about, one less airport to navigate the kids through, one less hassle.

I realize you are providing the gift, but if it is truly a gift, then let go and they them choose what they think makes sense to them.

Your concern about losing a half day seems misplaced. It the nonstop leaves at 6 am, then it will get in to SFO, say maybe around 8. They could be in Monterey by noon if it takes an hour to collect luggage, get the rental car and so forth. It's less than a three hour drive to Monterey. They actually gain time by leaving early.