Without doubt this mode of travel appeals to some people. However, on our travels through Rajasthan we encountered tour groups from the Palace on Wheels on a couple of occasions and felt that going by road, with a car and driver, suited us much better. You simply saw a hell of a lot more, had much more contact with the local people, and were not tied to any schedule. We stayed at the Laxmi Niwas Palace, which is part of the Lalgarh site, and it was very pleasant indeed. (Whilst there are some fountains there, I would not refer to Lalgarh being a water palace, though.)