FULLTEXT Search (InnoDB) - Am I doing it right?
Will you want San Jose to come up when the user types jo?  If not, then FULLTEXT is not useful.  Instead, a simple LIKE '$searchQuery%' is all you need.

Because of how many rows you have (130K), consider


SELECT DISTINCT -- to avoid returning dups.  (There are perhaps 328 San Jose's in the world.)
Don't auto complete if (1) the user has typed only 1 letter, and (2) if the select returns "too many" results.
Another thought is to ORDER BY POPULATION DESC.
Add a LIMIT to the SELECT.
Think about what to do with accents.