I just saw this great product ( Indic Transliteration : Typing in hindi made simple ) from Google Labs and its quite good and very easy to use. Not only Hindi, 13 other major Indian Languages ( Assamese, Bengali, Gujarati, Kannada, Malayalam, Marathi, Nepali, Oriya, Punjabi, Sanskrit, Sinhala, Tamil and Telugu ) are available from Indic On-Screen Keyboard