Microsoft India announced Indian language tool for writing in windows OS with different languages including Malayalam ....
for downloading this go to
http://specials.msn.co.in/ilit/MalayalamPreInstall.aspx
and settings for writing in malayalam do also this...
http://specials.msn.co.in/ilit/GettingStarted.aspx?redir=true&postInstall=true#Windows7