Im researching the CA national guard as an option when I finish my time in active duty.  I see here that only 1000 people within the NG are selected to receive tuition assistance, and they all have to have 2 years service in the NG.  

Is this correct or is this something that can be waivered by a commander?

That'll be state tuition assistance, probably their budget limit.  You should still be eligible for Federal tuition assistance.  Or you could just come to the Texas National Guard, where housing is much cheaper, there's no state income tax, and you don't have to have a silly looking stock on your AR & you can still hunt w/ lead boolits.

Im already stationed at Ft Hood and I love texas, but even with the lower cost of living here, I dont think I can support my family while I go to school here.  In CA my parents are setting me up in one of their houses for free as long as Im in college.

Difficult to compete w/ a free house.  Keep us in mind when you finish your degree.  No state income tax, cheap Canadian lumber/Mexican built houses floating on the prairie as far as the eye can see, lots of jobs, Austin for music/Californian re-education camp, Houston for oil, San Antonio for Tex-Mex, El Paso for smuggling, Fort Worth for living & Dallas for business.

where in CA, and what MOS?

Just dont join 185......

as someone currently with the 185, if you can go anywhere else, specifically the 184 do it.

The 185 is part of CAARNG but organizationally under the 81st BCT in WA. Both organizations think its the other ones job to pay for training it seems - the 185 doesn't get nearly as many training days as the 184, and all of the ones they do get goes to the bradley crews. 184 got a lot more funding, training days, and cool AT's outside the country like going to Australia and the Philippines.