Prague to Nuremberg- best suggestions?

Schedules can vary by day of week (Sunday, especially, can be very different), but it appears that the fastest public-transportation route is by Deutsche Bahn IC Bus. It's non-stop, and the scheduled running time is 3 hr. 35 min. You can take a look at the schedule on the Deutsche Bahn website and buy tickets there. The fare may be as low as 10 euros.

Trains seem to take about an hour longer and require a transfer.

I recently (last month) took the train from Prague to Nuremburg which, as acraven stated above, takes about an hour longer than the bus.

If you choose the train, some routings are cheaper (significantly) than others. The Man In Seat 61 gives you the details.
Edit: I paid $12.62 for an advance purchase (90 days) ticket from the Czech railway site, via Cheb.

https://www.seat61.com/international-trains/trains-from-Prague.htm#Prague-Nuremberg

Following his recommendation to transfer at Cheb, that station has several tracks but is not huge. So the transfer is easy. And the trains do wait (typically) for connecting trains.

are you heading for the Cruise dock? regardless have a look at this company, do regular transfers between both places.
https://www.prague-airport-transfers.com/services/nuremberg-cruise-dock.
run by and American expat and his Czech wife, highly reliable,I use them for airport transfers on a regular basis.

The bus run by DeutscheBahn would be the best choice. It goes from Prague Main train Station. It is nonstop, about three hours. The fastest connection between Prague and Nuremberg.

Heard the bus has a restriction on the size of luggage you can bring. Anyone ever have any issues with this?

What size are you thinking? Look on the website.