Nothing would bring a nation like that to its knees faster than seeing a supposedly immortal demi-god like the emperor vanish in a column of fire.
I agree, it probably should have been Tokyo.
But that doesn't leave out that the Allied command had a lot of bad options. Invade, blockade, or nukes all had the cost of a lot of civilians dead. I think nukes were chosen because that had the least amount of Allied dead, and because it was a new weapon and no one really knew what to expect with it.
Many folks have postulated that a direct attack on the Emperor would have left Japan in a frenzy and they really would have fought to the last man. The folks who say Mecca should be the first target following the next terrorist attack if there is another big attack might consider the results of that action (something by the way I don't consider a bad idea). Would a smoking Mecca break their resolve or fortify it? I don't know the answer, interesting question though.