I was pretty set on a hardtail MTB with lockout fork at first, Gary Fisher and Jamis have some offerings in my price range, around $500-600. Something like this would be great, since I do like to do occasional trail riding and my old mountain bike has long been handed down to my brother, as my current commuter is a road bike.
I think you answered your own question. Get the mountain bike.
Mountain bikes are undervalued right now, so you'll get a lot of bike for your miney. I'm riding a Haro MTB right now, and I like it better than other MTBs I've owned--and I've owned bikes made by most of the major manufacturers.
It amuses me how freaked out Californians get about rain. Try riding in six inches of fresh snow and you'll wish it was raining!
