We stayed at the international guest house in pondicherry. The only reason we booked it was that an AC room costed just Rs 600/-. But it was very basic room. I think the guest house is a no frills place which is just okay for the backpack travellers. Families should avoid this. This property is run by Sri aurobindo ashram and hence there are some restrictions here. We just stayed there for 1 night.
No room service available.
However, the hygiene was not compromised with. the room was big and clean and AC was effective in Pondicherry heat and humidity. This guest house was 10 mins walk from the Mahatma Gandhi statue or the beach location.
Ample choices of food nearby this guest house.

The International Guest House is much more modest than it sounds, and thats where its charm lies. This very affordable and sparklingly clean series of rooms is the closest one can get in India to a youth hostel. A lot of the people who were staying here seemed to be on a reasonably long trip to Pondicherry (i.e. not a weekend trip). This is probably because this is the only place in India I've stayed in, whose facilities are practical rather than frivolously decorative, thoughtful and hassle-free.

The room, and I kid you not, was squeaky clean, with not a speck of dust anywhere. Despite regular use, the linen was starched and absolutely clean. There was a wooden stand in the balcony provided to hang out clothes to dry. There was just enough furniture in the room, a bed and a sofa - nothing excessive was added to make the room look grand. It was a quiet, unassuming room, designed by someone who obviously knows what it takes to live out of a suitcase for a reasonably long time.

The room rent was a stunning Rs 100 per night. Of course, this was a while ago, and things might have changed now, but even after revision it is unlikely that it would be unaffordable. This place is located reasonably close to the French quarter and the beach. It is also walking distance from several French restaurants. It is simply the only place to stay if you are visiting Pondicherry. Should be taught as a service marketing case in B-schools! :)