I have not stayed there but know Prague opretty well.The Hotel is on a pedestrianised area at the bottom of Wenseslas Square, it is an ideal spot for visitng the city easy walk to old Town square and of course nearby Wensesls square,it can get very busy in this area by day and especially at night.The reviews I have read are quite a mixed bag from terrible to brilliant but I really can't say anything more than that.
One bit of info is nearby is the Cafe Bar Trinity, it is a lovely looking place at the corner of Wenseslas Sqaure and Rijna,however DO NOT be tempted to visit, it is the BIGGEST RIP OFF in the city, they charge 10 times the price you would pay anywhere else.

for alternative places have a look at this website.
http://www.livingprague.com/
there is an accommodation section on the left hand side of the page and links to hotels.

Thanks so much, unclegus, especially for the tip on Trinity.

http://www.tripadvisor.co.uk/Restaurant_Review-g274707-d2032377-Reviews-Cafe_Bar_Trinity-Prague_Bohemia.html
just read the reviews , real eye openers.
Btw that website I gave you has some great info and there is a secial section on Prgaue with Children,don't know what age your kids are but there may be some relevant stuff in there.
I know Jason that runs the website pretty well and he has kids(oldest is about 14 now) so his info is very good.

unclegus,

Wow. I have never seen such a low-rated place on trip advisor. We would be very likely to fall into the trap without your warning. I think they will keep having lots of customers due to the location and nice appearance because people don't check reviews for every single cafe they see. I will make sure we avoid it. Thanks.