When we were in town for Mardi Gras last year, we actually found it rather easy to get hot tables at great restaurants, as everyone was busy Mardi-Grassing.
It's also a nice escape from the crowds. Also, don't do all your watching from downtown, that's torture. Head up St. Charles towards the Garden district. We watched at least 3 parades from the Garden Dist. and loved the atmosphere, really neat, and beautiful architechture abounds. Upperline is a really good restaurant in that general area. Also ate at Emerils in the warehouse dist., as well as Bayona in the quarter. All were excellent!
-A