Meaning of "recommend with reservation"
No, it's not a good thing. With reservation means that there is a some reason not to recommend you. 

However,  "recommend with reservation" is an odd turn of phrase. I suspect it is a typographical error and should read  "recommend without reservation" - which is a good thing. If this is a typo, it is a seriously unfortunate one and you should definitely ask your recommender about this (particularly if you don't know what his reservation could be).