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I was there last year. I spent one night in Munich and then headed into Austria and hit up Salzberg and then Vienna. Most of them had something going on for Oktoberfest so unless you had a specific city in mind, keep your options open.
Truthfully, what I'd recommend is seeing whats available on Craigslist (if you can't get a hotel). Just like Mardi Gras and the 2010 Olympics there'll be bound to be people profiteering off of folks just like yourself who can't find accommodation.
The good thing is that the Germans are notoriously awesome and friendly so you'll probably get your money's worth if you go for a B&B. German food is the best.
If you're going for a few weeks don't waste your time in one place. The close proximity to, well, everything makes for some awesome road trips. Berlin and Munich are about a three hour drive from Prague (but you'll thank me when you see the Czech women) and if you're feeling like an extended drive you can always head south and reach the north end of Italy.
Rent a car. Drive. You will enjoy what you see.
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