Should I reserve a room for the full moon party?
The best way to get a good guesthouse for the full moon party is to get there early. By early we mean 4-5 days before the party -- not a day or two. This will give you time to find a flophouse to crash in and then spend time triping around Haad Rin and or the island to find the place you want. Remember ALL beaches on Ko Pha Ngan will organise transport to get to the party -- you do not have to stay on Haad Rin to party -- in fact an increasing number of people trip over from Ko Samui just for the night. Also, remember a LOT of people leave before the party.
Many guesthouses have three to four night minimum stays over a FMP -- six to seven day minimums is not unheard of. In our experience, these are not negotiable, though individual mileage will vary.
If you MUST have a reservation, use a phone and make a telephone reservation once you are in Thailand. Don't bother calling from overseas as you'll rapidly run up the cost of a weeks accommodation on your phone tab. Not all places have a phone, but those that do will almost always speak enough English to take a reservation. If you make a telephone reservation do your best to get there early -- the later you arrive the more likely the guesthouse will dishonour your reservation and give your room to backpacker #125,432 today that has walked in asking for a room. You can gets phone numbers for many of the Ko Pha Ngan guesthouses from Travelfish.
Another option is to go into a guesthouse/travel agent in KSR and ask them if they can book a place for you. Most have pictures (which vary in their accuracy!) of resorts, if they make a booking for you, they may even be able to take a deposit from you, which will help to guarantee you a room.
The reason we suggest you use the phone over the web is that most (though not all) of the cheaper places that take bookings online are dumps, and places have been known to run photos of other resorts on "their" booking page -- book online with caution -- look for reviews where possible. The mid-range and upper cost places are limited in number and generally well profiled on the web, so they tend to fill up quickest and they are often outrageouly overpriced.

If you can't get a reservation and arrive too close to the party to get a room near Haad Rin, the best beaches for overflow are Baan Tai, Baan Kai and Ao Thong Sala, Ao Plaay Laem, and, if you don't mind a boatride, Haad Yuan.
Lastly, consider staying on Ko Samui. Mae Nam has stacks of bungalows in the 150-300B range that are great value, and there is transport over to the party on the night.
The last time we were on Ko Pha Ngan across the xmas season was a few years ago -- we arrived on a packed boat from Ko Tao on Christmas Eve in the late afternoon. At the wharf there was a big banner reading "Ko Pha Ngan is full" There were people sleeping in the restaurants of Thong Sala and apparently over 200 sleeping in the wat just outside Thong Sala -- Merry Xmas.

Luckily we were staying with friends who run a resort there -- though we still had to sleep on their floor. We would guess almost half the people on the ferry we were on gave up on the wharf and got together to head to Samui.
Ko Pha Ngan is a big island with a lot of accommodation options, but it does fill up - particularly at this time of year.
Just our two cents - hope it helps to keep you off the restaurant floor!
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