Oh no, stay in SFO and enjoy, spend the extra $$ as the city is incredible. There are a number of Marriott properties in SFO, depending on what you want to do and where you want to go. My preference, The Wharf as it is down near the water and close to wonderful dining, great views and much more. Walking is SFO, so put on your shoes and take a nice long walk up and down the streets of the city. Explore it all I say.
I agree with IAHFLYR, unless money is tight for this trip, I would try to stay in the city. There is a Courtyard at the Wharf - remember, there is a 10,000 point bonus for three courtyard stays. There are also a number of hotels, on the other side of Chinatown. It is an easy city to get around - walking street cars, etc.
Otherwise, there are two Cat 5's by the airport with easy access to BART trains, and two in Oakland. Far better than not going at all!
In either case, enjoy.
As far as your question regarding the ability to pay to 'upgrade' your Cat. 5 into something higher, ijfri has stated the answer - no. Sadly, in spite of numerous requests by Rewards Members, there currently is no way to use a Certificate toward a property higher than the certificate.
As far as San Francisco, iahflyr and psudad are dead on correct, (which you probably already know) the beauty is in the city. I've had good luck at the Cat. 5 Residence Inn at Oyster Point out near the airport with a car and others have had good times using BART (as psudad writes) at the San Bruno Courtyard (BART is around a half mile away) or in Oakland (for example the Oakland Marriott City Center is a Cat. 5 and is 1/10th of a mile from BART). I can't remember the posts, but if you type Oakland or San Francisco into SEARCH box in upper left column, you will get input on each city's properties and see, that although somewhat limited, you can craft a strategy for both using your certificates and catching the action of San Francisco. Welcome aboard.