I called the SAN FRAN consulate office today
and asked them about the extended stay visa.
I told him I planned to stay over 3 months in Italy. He said after 3 months I should go to the Questura office and apply for the extension there. Has anyoned else tried this? it seems too good to be true.

Unfortunately it is too good to be true. The SF office is also going through a lot of problems at the moment so I would take anything with a very large grain of salt. Also what they know id visas which gets you into Italy and the questura is the one that allows you to stay once you are in.

Basically, if you want to stay longer than 3 months but less than 6 for example, if you are good and apply for the permesso di soggiorno within 8 days of arrival (at the local questura) and then when your time is almost up you can go back and ask to extend it they may be nice but truthfully you cannot extend a tourist permesso.

Your question though is better answered in detail at my forum as many have done this pr are going through this.