I live in the LA area and used to live near Monterey so please feel free to ask questions (I'm not sure if there are other people on HT who live in CA but there are definitely others who have been to CA, so they are also good sources of information).
You can take Highway 1 all the way from SF to LA. It will take some time, but fortunately you aren't in any hurry.
You already mentioned Big Sur, but some other possibilities include Half Moon Bay, San Luis Obispo, San Simeon (which I think is where Hearst Castle is located), Carmel, and Santa Barbara. There aren't a whole lot of stops along the way, at least not compared to the two main routes you would take if time was a factor (either Highway 101 or I-5, or a combination of the two). However, it does mean you get to see the scenery, which is particularly beautiful between Monterey and Big Sur.
I am less familiar with the coastline the further North one gets but I'm sure the scenery is very nice there too. I am mostly familiar with Monterey and anywhere between there and LA, at least in terms of the coast. Depending on the exact time of year you are going, you could also check out Castroville, which has an annual Artichoke Festival. Their claim to fame is that Marilyn Monroe was the Artichoke Queen some time in the 1950's.
For hotels, if you want upmarket you'll have to pick your locations wisely. For example, I don't think Big Sur has any really upmarket hotels (although I'm fairly sure it does have accomodation of some sort; there's a restaurant if nothing else!). Monterey has some decent hotels and there is a Marriott (I think, it's been a while since I lived there) in Seaside, which is a town a few miles North of Monterey. I seem to recall them putting up Hillary Clinton about 3 years ago (it was a big deal locally) so it can't be too bad! I'm sure San Luis Obispo has some decent hotels, and Santa Barbara almost certainly would (but I've never stayed in any, so you'd have to double check).
The absolute best hotel I have stayed in - in terms of value for money - was the Larkspur Landing in Campbell (a suburb of San Jose). However, it's likely you won't be passing through there since it is not on the coast. Still, if you do go to San Jose, there are a ton of high class hotels (Hilton, Marriott, Sheraton... the usual suspects). Obviously any major city like that is going to have that kind of hotel selection.
Going back to romantic places... the restaurant at Big Sur (to my knowledge it's the only one, at least the only one directly off Highway 1) has a stream running next to it. They have large wooden chairs for customers to sit out in the stream. It's very mellow, although I don't know if you're allowed to eat your meal out there (though I believe drinks are fine). The restaurant has pretty decent food and I would recommend it. I don't recall the name as I've only eaten there once but, as I say, I'm sure it's "THE" restaurant to go to in Big Sur so it should be easy to find.
I also recommend Tarpee's (or Tarpy's, I forget), which is on Highway 68 close to Monterey Airport. It's easy to miss off the highway so you have to keep an eye out, but they do pretty classy food. You know...all the stuff with fancy foreign names. I ate there once and didn't know what half of it was! So, to be on the safe side, I had the steak but even that had some fancily named sauce with it.
There is Seal Beach, which is probably not it's real name but it's what a lot of locals call it. I'm sorry but I don't remember it's exact location. It is obviously near the coast and I do know it's in the San Luis Obispo region. Depending on the time of year, hundreds of elephant seals come to mate and it's quite a sight. They occupy an entire beach and are fascinating to watch (although it's possible you will have seen enough seals if you went to Pier 39 in SF!).
There is an interesting town called Moss Landing. It's on Highway 1, a few miles North of Castroville. You can't miss it because of the huge twin chimneys it has for the power station. Anyhow, if you pull off the highway and venture into the streets (on the west/ocean side of the highway), you'll find a lovely fishing village. It has antique shops, thrift stores, and restaurants serving the local catch. I think it also has a beach you can go on.
Of course, there is also Santa Cruz, approx. 20 or 30 miles North of Moss Landing/Castroville. The only thing I could recommend about Santa Cruz is the Beach Boardwalk, which is great if you like fairgrounds and rides. It also has an authentic American wooden rollercoaster. Just be careful where you venture in Santa Cruz, though... I mean, it's actually a fairly safe city but it has a high homeless population (like SF) and it's a bastian of Liberalism. Not that the latter makes it unsafe but it's certainly an eye opener as to how bad a city can get when it's run by the far Left.
Politics aside, if you do decide to venture inland a little more, there is Gilroy which is South of San Jose on Highway 101. It's also accessible from Highway 1 via Highway 152. They have an annual Garlic Festival. You'd have to check when it is.
If you wanted to bypass some of Highway 1 and get at least a reasonable start (to cut down on the time), you could drive on Highway 101 South from SF and only cut across to Highway 1 later (there are a few highways you could take to do that...it just depends on where you want to go and how long you want to stay on Highway 101). Let me know if you need more info on this or anything else and I'll do my best to answer your questions.
