I think it depends on the state/area you are planning to visit. When we visited Kerala, we used http://www.keralagreenery.com/ . When we visited Rajasthan and Agra, I made the reservations with the help of a friend in New Delhi. I found that the reviews on tripadvisor are very helpful in deciding on a tour agency. I have also traveled with http://www.kunduspecial.co.in/tourpackage.php?cms_id=9 and apparently that is the way many Indian people travel. I loved the fresh cooked meals they served, and want to travel again with them just for the food.

Good luck.