Dov,
Just got back from Prague. What a great city. You will love it. There are lots of sights you will appreciate. Oh yeah, there are some historical stuff as well.
Definately get the day pass for transportation. It was quite easy to move around. Wierd, the 3 days of passes is more expensive than 3 one day passes. The passes are good for 24 hours, so you probably won't need one for each day you are there.
I stayed at the Sheraton. A bit off the edge, about a 10-15 minute walk to Old Town.
Definately take a walking tour. Lots of good information. I used the free one that asks for a tip at the end. IIRC, they asked for about 10 euros. They meet at 10am and 2pm in the Old Town Square, next to the tourist office. A green umbrella is their identifier. I will find their web site for you.
If you do money exchange, make sure that you find one that does no commission on the selling of Czech money. Signs say 0%, but often that is on the buying of Czech currency. As always, off the tourist areas is better than near it.
One of the great parts of Prague is the people. Spend time away from the tourist areas. I personally liked the area near the river, south of Old Town. Lots of locals.
You have to visit the Jewish Quarter, especially check out the artwork from the kids in the WWII concentration camps.
If you do take a taxi, AAA taxi is the legitimate taxi company. Others will rip you off.
From the airport, I chose a private car. It took quite a while (30 minutes) to get to the city center, as there are no real freeways into town. I think it cost about 20-25 euros.
Beer is cheap, even in the tourist areas. There is a thread somewhere here on the various pubs/breweries. I will look for it.
Welecensas (sp?) Square is a great shopping/people watching street. Worth an afternoon just browsing.
You will love it, it is a great town.