I have been struggling to find budget lodging; I'm traveling with just my 1.5 yr old so it's the first time dorm beds haven't been an option. I've always used hostels.com but the prices they show are always for 1 person's portion of a room, but you have to pay for the max number of people who fit in the room which adds up to just as much as a nicer hotel! Any ideas?
Where are you travelling to? You might have a look at the RS guidebooks for the places you're visiting, as they have good, reliable lodgings shown in various price ranges. The books include website links so you can book directly with the hotels, rather than involving a middleman.
booking.com and hotels.com work well and you can filter based on price. In a hotel, a baby might be free and you could look for a single room with a baby cot.
Both sites have reviews and ratings from customers.
In what countries will you be traveling? I don't have experience with non-German-speaking areas, but in Germany, Austria, and German-speaking Switzerland, I have had much success with using town websites, particularly outside large cities. In Germany, use www.town name.de. Some of these websites will have an English language side. If not, you will need to know a few German terns for accommodations (Unterkünfte), but you can look them up on Google Translate. I've found that on the average, there are two to three times as many places listed on a town website than are shown on booking websites, and these tend to be smaller, family run Guesthouses and Pensions and a lot less expensive than places listed on booking websites. The less expensive places on these websites tend to operate on a shoestring and can't afford the 15% commission places have to pay for bookings through commercial websites.
If you tell us the specific places you are traveling, and exactly what your budget is (in actual currency - "budget lodging" has different meanings for different people), we can offer suggestions.
In addition to the tips given above, look at EuroCheapo. Besides having specific listing for some cities, they have general tips that will help whatever your budget: http://www.eurocheapo.com/allcities.html
Two other hostel websites are http://www.hostelworld.com/ and http://www.hostelbookers.com/. And hostels can have private rooms for 2, so you are not always paying to fill a larger room. But you are right, with two people, an inexpensive hotel can be a better deal. Plus, with a 1.5 year old, you'll most likely want an ensuite bathroom (not one down the hall).
Be sure to e-mail places directly, rather than trying to book on third-party websites. Since you have an infant, you can be sure of getting your needs met, and you may get a better price (compared with booking a "room for two").
I think that EuroCheapo is just another branch of Booking.com (same format and same not-quite-as-low-as-booking-direct rates).
Thanks for the tips everyone, we're doing a bit of a whirlwind trip with the eurail global pass so I was hoping to book all in one place but I guess I'll put a little more time into finding places in each city.