We were in Prague last week and here are a few suggestions:
We stayed at the Lidi guesthouse which is great (and mentioned in Rick's book). The owners are wonderful and extremely helpful. The guesthouse is in a quite neighborhood that is not many tram stops from downtown. We used tram 17 the most.
The old town square is packed with tourists so we sat at an outdoor restaurant, El Torro, right across from the clock. We just ordered a couple of beers and were able to watch the clock while sitting down under an awning. No trouble seeing the clock since it's up high.
Wonderful gelato at Angelato's, which is a block north of Wenchelslas (sp) Square. Not surprisingly, there were many Italians at Angelatos.
A great restaurant is the U Koura which is within walking distance from the tram stop just before the one for the Lidi guesthouse.
Prague is very beautiful but very popular. Can't imagine what it would be like in July!