First time/help with itinerary

I like #2, mainly for safety reasons. If you've never driven in Germany before, jumping into a car immediately after a trans-atlantic flight is not the best idea. At least if you're headed towards Heidelberg, it's not that far of a drive. BTW, where do your friends live exactly? I used to live in that area, and know it very well.

I like the idea of staying four nights in GaP. If gives you flexibility in case you lose a day or two to bad weather.

If time is short, there is one destination I would cut- Rothenburg odT. Yes, it is pretty, and every travel guide plays it up. But if you spend some time driving in the vicinity of Heidelberg, you'll notice something. Rothenburg isn't unique, with the exception of all the trinket shops and tourist hordes. Drive up the Bergstraße (B3) towards Darmstadt, stopping in Weinheim and Heppenheim, or drive up the Neckar River Valley towards Bad Wimpfen and you'll see what I mean.

Please do not rent a car in Frankfurt and start driving right after a long flight. Frankfurt is not the easiest place to drive even without the problem of being "lost" and jet lagged.
I lived in Aschaffenburg and Wurzburg and here is my suggestion. Take the train to Aschaffenburg which is 50 or so miles south of Frankfurt (and about the same distance from Wurzburg) and acclimate there and then rent a car. There is a lovely castle there named Johannesburg (sp?). There is also Pompeiigean (sp?) which is a replica a villa in Pompeii. If you drive the old road (not the autobahn) to between A'burg and W'burg, just south of Haibach which is just south of A'burg is the village of Messpelbrun. It has a fairy tale moated castle that has been in the same family for 5-600 years. In W'burg visit the Prince Bishop's Residence. Be sure to see the Hofkirche on one end of the Residenze. Easy to miss if you are not looking for it. The Marienberg Fortress is ok but if time is tight skip it. The view of it from the town is more impressive that the view of the town from the fortress. From W'burg it is a short drive from Rothenburg, Milltenberg (sp?), and Heidelberg. You should be able to google all of these and see what you think. Let me know if you need more specifics. Hope this helps.

I like plan #2, with a couple of trains in the mix. There's usually no extra cost to pick up and drop off a rental car at different spots in the same European country. If you start with a train to Heidelberg, then that should be a good city to pick up the car when you're ready to move on. If you drop the car in Munich, then Frankfurt airport can be reached by direct train in 3.5 hours.
That later, longer train ride is a good candidate for purchasing and advance-discount ticket through DB, whereas the first train ride after arrival is a good candidate to buy in the train station.

Thanks everyone for the replies and idea's. I didn't think about the jet lag thing. I am not worried about driving as I live in Los Angeles and if I can drive here I feel I can drive anywhere =). However I do not want to drive if I am disoriented, thanks for that. After everyone's input how does this sound? It will be much less detailed btw

Fly into Frankfurt on July 4th
Train to Munich (3 nights)
Rent car in Munich after the 3 nights
Drive to Garmisch - Partenkirchen (5 nights here)
then off to Heidleberg ( 3 nights here)
Frankfurt to fly home

I think this will be much better and I actually have never been on one of these fast trains before so it really did not take much to talk me into that =)

I feel these are 3 good bases of operation, and with the multiple nights it means less travel. I would prefer to not have to constantly go to another Hotel every other night.