Yes, it's crowded, and yes, it's touristy but it is worthwhile to visit. The castle sits atop an outcropping of rock at the western end of the Royal Mile; from there, it is all downhill until the Palace of Holyrood House at the eastern end. All along the Royal Mile, there are closes (alleys) that lead into courtyards and gardens; walking along and exploring these hidden treasures is a great adventure.
If you have plans to visit other historic spots in and around Edinburgh (or throughout Scotland if you're traveling further), it makes sense to check out the Historic Scotland ticket trailer parked below the Castle-only ticket trailers in the plaza. Historic Scotland sells 3, 7 and 14 day tickets that allow you free admission to many historic properties; as the cost of individual tickets can really add up, a lot of money can be saved.
Once inside the castle walls, check out the view from the ramparts: you have an amazing panorama of the city and beyond. St. Margaret's Chapel (built in 1100) is tiny and tends to be bypassed by the crowds but is worth stopping in; the whitewashed walls are off-set by little jewels of windows. The officer's pet cemetary is also worth a look: it's tucked away below the walls of the castle and is poignant. We found the rest of the castle area to be very, very crowded and made our way out to explore the Royal Mile.
Keep in mind that while this is a "tourist city", there are people who live and work here; not every store is a tourist trap and there are plenty of coffee shops and cafes that "regular people" stop in. It is possible to look beyond the tourism and see the everyday city that co-exists with the history.