Since I lived there and didn't stay in hotels I can't give any specific advice there. However, one thing I would warn them about is that staying outside of the city would require them to get into the city. And if they are doing that in the morning and evening they'll be stuck in awful commute traffic. Driving or public transit both are terrible from about 6:30 am - 10 am in the mornings and ~3 pm- 7 pm in the evenings. I mention it because people often don't take that into account when they find a hotel that's $25 cheaper down the peninsula or up in Marin, then they waste 4 hours a day in traffic or spend $40 on train tickets. Sometimes it's worth sucking up the more expensive hotel in the city and walking everywhere.
Wine country is spread out, so there are a lot of regions to choose from. I prefer the north end of Napa valley around Calistoga. If they have a few days they could move regions - maybe 1 night in Sonoma, 1 night in southern Napa Valley, and 1 night in the north end of Napa.