UPDATED 5/3/2016:
I use almost the same ingredients as for urad dahl dosas. The main difference is iddlis are steamed and dosas pan fried.
INGREDIENTS (for about two dozen small iddlis):
1 1\2 cups rice ( I use the short grained rice labeled "Masoori" at the Indian grocer)
1/2 cup urad dahl
2 t fenugreek seeds
warm water
scant 1/4 t black pepper (or cayenne or minced chilies, as desired)
2 t salt,
2 t sugar
ghee
mustard seeds
DIRECTIONS:
1. Sort, rinse and soak the rice and dahl and fenugreek, sufficiently covered with water for 6-8 hours.
2. Drain the rice and dahl and fenugreek. Put all in a blender and cover almost entirely with water and blend well.
3. Stir in sugar and let set in warm place overnight, such as the top of a warm oven, until double to triple in volume. Then add the salt and black pepper.
4. Fill a large pot with a few inches of water. Also it helps to put a stainless steel lid or a similar implement at the bottom of the pot, immersed in the water, in order to raise the iddli maker higher above the water during steaming. That way you won't run out of water too quickly.
5. Meanwhile, while the water is heating up, fill greased iddli trays with a generous tablespoon of batter per iddli. Wet the spoon first for easier transfer of batter.
6. Cook inside steaming pot covered for about 25 minutes or until firm.
7. Remove cooked iddlis from mold. Make a mustard seed chaunce as decribed below and pour over iddlis before offering.
If you don't have an iddli maker, here is another method I've used many times with great success: 1. Place a large, moistened cotton cloth on a working surface. Pour on the iddli batter, enough the size of the lid for the pot you are using to steam with and about an inch in depth. Cover with the pot lid and securely tie the cloth to the lid. Set the lid on the pot when the water is boiling for steaming.
Be careful not to let any cloth hang too loose or close to the flame or that the flame is too large for the diameter of the pot.
2.. Cover and steam everything 25 minutes
3. Remove the lid and set it onto a large plate. Untie and take away the lid, exposing the steamed iddli cake beneath. Place another plate over this and flip the bottom plate over so that the iddli cake lands into the second plate. Remove the cloth and soak it in the hot water in the steamer for easy cleanup later.
FINAL SEASONING
Place the cooked iddlis on a plate or slice the iddli cake into wedges and chaunce them with a tablespoon of mustard seeds in a couple generous tablespoons of ghee. Cook the mustard seeds in the ghee long enough until they are done popping and pour all over the iddlis or slices.
Traditionally these are offered to Lord Krsna with some coconut chutney and lots of love and devotion. Or serve with sambar or a favorite soup. But my favorite quick way is just the mustard seed seasoning on top and serve with various dishes as you like or alone as a snack.
Cooking iddlis in a cloth has become my favorite method. No more messing with iddli trays afterwards or storing them (Well, you still have to clean the cloth to get all the starchiness out). Be careful however not to overfill. Do not let batter go beyond the inner perimeter of the lid, because if some gets on the outside it'll cause the cloth to stick there.
A large amount of batter can be stored in the fridge to be used throughout the week. Very healthy menu item. Low in fat and high in protein. It's especially good for growing children and invalids.