Clearly we're in a gray area in the midst of a bunch of different rules: UA doesn't spell it out clearly on their website. "Excess valuation" is a good idea but not one all travelers are well-versed in. The official IDB rules are probably unclear as well - and probably wouldn't apply since UA would say the passenger was allowed boarding, only the bag was denied boarding.

IMHO, the right and human thing to do would have been to allow the OP to rebook a later flight. We're talking SFO-LAX here. Aren't there a bajillion UA flights on this route every day?

In the future, OP should maybe consider one of the other airlines that flies that route a bajillion times a day (Southwest? Virgin?), or do the bag-in-bag thing. But I also believe that UA reacted in the least client-centric manner possible here, proving again why they are such an awful organization on the same level as cable companies and wireless providers.