Found this little place a few trips ago. My wife and I were staying at a place on the ghats that was supposed to have a good restaurant, but it was terrible. We were looking for somewhere to eat and stumbled upon Shree Cafe in an alley above Dasashwamed ghat and decided to give it a try. I've been back to Varanasi twice since then and Shree Cafe is where I eat!
As a bonus, the family that runs Shree Cafe also has an Art Gallery next door. Third Eye Gallery. No not a handicrafts store, a true Art Gallery, with exhibitions and opening nights and all that fun.