Should I take cash or use debit card in Prague during Covid?

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I was there few weeks ago. Both are perfectly fine. For small purchases like street food or drink, it seems like cash is the "normal" way of operating. If I recall correctly some stores may have a "minimum" for using a credit card, maybe $5 or thereabouts. In most stores you can pay either in Czech Krona or Euro.

No one wore masks outside and even inside mask wearing was kind of spotty. Officially you are required to carry proof of vaccination or recovery but I don't think anyone ever asked for this.

CAVEAT: This was about three weeks ago and Covid cases are rising sharply in the Czech Republic. Current situation and rules may be different now. Check out: https://www.pragueexperience.com/information/coronavirus.asp

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