Leo I.
Google
We stayed here for one night in October as a party of 4, all in individual capsules. I don't know what kind of bedding they had, but we all had the best night's sleep of the entire trip here in the guesthouse (much more comfortable than the temple we stayed in for the next night).
Each capsule has a curtain for privacy, a light and power socket, and enough room for a small bag for essentials.
The place was spotlessly clean, and Ryochis home cooked breakfast and coffee were fantastic. In fact, Ryochi could not have done more to accommodate us. After we informed him of our late arrival (due to our confusion over which train to get from Osaka), he booked us a table at the nearby (and excellent) izakaya.
It is located close to the entrance to Okunoin and the mausoleum of Kobodaishi), ideal for early morning or evening walks in the cemetery.
Overall I would heartily recommend staying here. You can't beats it's combination of value, location, and service.
Some tips: There are no weekends taxis from the funicular station after 4pm, and each bus into Koyasan from the station was about 30 mins apart. So try to get here before 4pm in order to have the most transport options.