On Sunday morning I found a bakery in the Mission district that makes fresh churros. It's the Dominguez Bakery at 24th and Alabama, across the street from La Victoria Bakery.
They're hard to find though--you need to walk through the retail area, past all the bakers cooling racks stacked high with fresh breads, and into the kitchen in the back. There you'll see a man working the fryer. As he finishes each batch of about 10 churros, he tosses them in a pan of sugar and cinnamon, then adds them to a tray. The tray is packed tightly with dozens of churros, so it's no surprise that most of them become damp, mushy, and sticky. But if you hang around for a few moments you can catch some straight out of the fryer/sugar.
Are they good? They are far better than the mass produced churros you find at ball parks, carnivals, Costco, etc. They have high doses of sugar and cinnamon and have a lingering greasiness that makes me suspect they are fried in lard--all good things! My only complaint is that they use a very open star-tip extruder, which results in churro that get fried and crispy almost all the way through. A perfect churro should have a bit more chewy dough inside.
Of course, we also tried Dominguez's empanada de calabaza, which won points for having soft wheat dough but had watery, flavorless filling. Panadería La Mexicana, described in the link below, remains the best pan dulce source of the dozen or so places I've tried in San Francisco. I'm still searching for someplace better.
2951 24th Street (at Alabama)