I think what you want is a Devanagari font with an input manager --
essential when dealing with large character sets due to the many conjunct
letters such as those generated by North Indian scripts or Tibetan. The font
is less of a problem -- there are many good-looking ones now available. As
for the IME, I did have such a system which was available for free download,
the input mananger needs to be installed with the Templates & Add-ons. You
just type romanized Sanskrit or Pali and the system converts automatically
on screen to the correct Devanagari. However, I lost it when my hard disc
crashed last year so I can't tell you the URL details. I suggest you do a
web search for Devanagari + input manager -- you might get something useful.
If not, join one of the many Indology groups (such as Indology hosted by
Yahoo) and you are sure to get what you want. Once you have got the IME,
you can type away to your heart's content. But if you want something really
difficult, then try inputting traditional Mongolian script !