It is certainly a great destination at this time of year, with good Christmas markets, hot red wine, and it is a great cultural centre. Czech tradition has 24th December for both family celebration and present giving, so the hotel suggested that the centre of town would close down from 2pm and be very quiet by 4pm. This was an exaggeration. There was still plenty of things open when we headed back to our hotel at 4pm and the streets were busy with both locals and tourists. The Jewish quarter had many old synagogues open throughout the Christmas period and they are well worth a visit. The old town square had an enormous and beautifully decorated Christmas tree and a very good Christmas market.
There is so much to see and do in Prague but it depends on your personal interests. However, I would definitely advise booking dinner for Christmas Eve and Christmas Day in advance of travel, to ensure you get a good choice of the better restaurants.
Prague has music a-plenty throughout the year, so you take your pick of what you fancy. There are many supposed "Gala Concerts" which have programmes built around classical music favourites (Ravel's Bolero, Mozart Eine Kleine Nachtmusik) and boasting a top orchestra and a soprano. However, looking more closely at the details some of them have little more than a string quartet and one singer. I am sure that these offer great entertainment in beautiful settings so I am not knocking them, but we are musicians so like to hear the "real deal" so to speak. A friend who knows Czech music really well recommended that we took in a performance of Ryba's Czech Christmas Mass which is performed throughout the city and is traditionally played every Christmas. Ryba was a contemporary of Mozart/Haydn but not quite in the same league. Nevertheless, it was great to participate in a genuine Czech Christmas Day tradition and the music was lovely. Again we chose a performance by a professional outfit - the Prague Symphony Orchestra. On Boxing Day we went to a concert by an a Capella 8-piece vocal group called the Gentlemen Singers who were fantastic. An absolute joy to hear such quality of singing live.
Other than music, we had 2 special tasting menu dinners in great restaurants. However, the wine pairing for the 8-course one took its toll on me!
We also went to a Tutankhamen exhibition at the National Museum which was interesting, despite the lack of Tutankhamen artefacts 
. We learned a lot about Czech history on this visit - about the pre-reformation figure Jan Hus, about the struggle to get access to Western Music/Culture during the communist rule etc etc etc.We spent a lot of time walking around admiring the great architecture and popping in and out of things that caught our fancy. I would thoroughly recommend the hotel we stayed in http://www.goldenwell.cz/default-en.html . It is central but on the quieter side of the Vltava River. It had a fabulous restaurant and did great breakfasts, as well as having free coffee 24 hours a day in a lounge and free snacks and wine between 2pm and 4pm each day. It was about 15 to 20 minutes walk from the old town square, less than 10 minutes from the Charles Bridge.
I would thoroughly recommend Prague for a Christmas break but the tourist hot spots were busy.
Clariman