My wife & I will be touring Provence in a rental car from July 3 to 11, 2011 and thought it may be a fun to simply tour Provence and each time we find a village or town we would like to stay overnight, make a reservation on the spot, instead of planning the itinerary well ahead & have our reservations in advance. Is this a good idea or are we likely to find most accomodations already booked?
July is high season in Provence. You could reserve one or two hotels and then use them as a base for your day trips. I like St. Remy de Provence about 1/2 hour from the Avignon TGV Train Station. This is a small city with a pedestrian "old town". Wonderful restaurants and a variety of hotel accommodations both in the city and nearby.
You dates in early July are indeed in high season (prices will reflect that), but not quite peak demand yet. Which means that footloose may work for you. It depends on your degree of flexibility and budget elasticity, for what you may find...
Provence is very popular with Brits and as such if you were going in August I would suggest you book in advance. Your July dates are avoiding British school holidays and so you should be fine in my experience. Some of the nicest places to stay are found ad hoc.
I have done this many times and only had a few slight panic moments... but since I had a car I could move on. One was a holiday I knew nothing about and had to go to a town a few miles away, help at TI office. Flexible and spontaneous is part of travel for me. But, definitely not for everyone. It allows lots of freedom. I am not crazy about my whole trip planned out before I go. I have done both and I prefer 'winging it' I would risk it more in July, than August as previously stated.