A good summary of all the issues. But, if you didn't already see my posting, I pulled up the location of the crash on Google Maps (got the address from another article), and it's just the other side of the power lines.
However, they apparently struck the power lines about 2000 feet southwest of the runway centerline -- if they took off to the northwest. They would have made a left turn very soon after takeoff.
If so, it's not clear (to me) if that left turn was intentional. If the owner was the pilot, I presume that he was familiar with the airport, and with the power lines. So, if he did have an engine failure, I wouldn't expect him to turn that direction while flying at Vmc.
The other possibility: they took off to the southeast, and were trying to make a circling approach to land again. But, I don't think that's likely, given the depicted trajectory of the wreckage (if it's accurate).
See the Google Map here:
Small plane down in East Palo Alto
I'm wondering if he had an unrecognized gyro failure.
I found this link a short while ago.
http://www.mercurynews.com/peninsula/ci_14416855?nclick_check=1
Read the entire article as down a ways a pilot who operates off that field describes the weather 100 and 1/8th and the noise abatement climb and turn to the right over the bay.
There is a map at the bottom with the take off direction and crash site indicated.
Looks like left engine failure very close to the ground, like maybe at 100 to 200 ft.
Artificial horizon failure could result in the same thing, but I suspect the engine.