If there's more than three of you, then I'd always recommend going for an apartment. It usually works out only a little bit more expensive than a hostel, and is worth it's weight in gold for the added privacy and ease of meeting up and/or staying in!
I stayed with 7 other people in Opera 1 through Escape to Prague following the Guardian recommendation, and it was excellent. Lovely place, clean, roomy and three bathrooms/toilets.
If you're going to hostel it, again I'd recommend paying a little bit extra and going for somewhere nice. Miss Sophie's was excellent, and far enough out to avoid the crowds, but close enough to stroll into town.
Check out Banditos opposite for a friendly drink, and The Crow for some late night supping of that gorgeous beer!
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