It might work for 20 somethings just out of undergrad. But when you start looking at founders who are older and have families, you eliminate a lot of talent from the pool (including people with actual experience). It just isn't feasible for everyone.
Actually we have quite successful founders who move with their families to Mountain View — notably the two founders of Mongo HQ and their families shared a rented house there for the duration of the batch. They happened to stay in the Bay Area, but they could have just as easily went back home after raising their seed round too.
mbreese didn't say that it eliminates all such founders. I think the argument here is that some number of startup founders (where the exact number would be hard to pin down) are unable to move to San Francisco for 10 weeks due to other commitments, and that this factor is probably going to be more pronounced with older founders - who are more likely to have spouses, children, mortgages, and other entanglements that work against letting them move.
The other argument, that I'll make, is that as nice as the Bay Area is, you don't have to be there to be successful.
Assuming that all of the smart, talented, hard-working, $INSERT_SUPERLATIVE_HERE people in the world aren't already in the Bay Area, then if you accept the above premises, it stands to reason that a YC expansion to some other parts of the world could be very effective.
