Talk to the JNTO and get them to help you book via the Welcome Inn system (details on their Web site). I'd stay in O-Tsumago if I were you, which is ten or fifteen minutes' walk from Tsumago. I stayed once (as the only guest) at a farmhouse on the hill above O-Tsumago, and once in a very ancient ryokan on the main path. Both had superb food, and despite being completely traditional were happy to accept foreigners. No names, I'm afraid, because someone else made the booking in each case, but O-Tsumago is a small village, and not exactly packed with accommodation options, so it should be possible to find either.

I usually avoid recommending guides, and I know nothing about Fodor's Japan, but the current and former residents of Japan I know all recommend Moon Publications' Japan, which, although now several years old has a real passion for the country, describes many places not to be found in other guides, and was written by someone (sadly now deceased) who lived in the country for some time.

Peter N-H
http://members.axion.net/~pnh/China.html

Dear Sarahobrant, If you are checking e-mail as you go: We used the local minshuku booking service in Tsumago or Magome, can't remeber which, but Kodansha guide will show it. We stayed in a very sweet place where we were served delicious meals including horse sashimi and caramelized crickets. I ate the crickets, but made my partner eat the horse in the interest of international good relations. Have a great time. AndrewDavid