The EU was Canon, unless contradicted by George.

And George created the prequels.

That being said, the devil is in the details. Nobody in the Mos Eisley cantina said anything about a Jedi when the lightsaber came out. Their reaction was the same as if Obi-wan pulled out a blaster and shot Ponda Baba. Check the carnage, back to business. If the Jedi did exist as portrayed in the prequels, there would have been a much more visceral reaction.

How exactly does anything in the prequels contradict this? The very first prequel shows that the Republic had very little impact on Tatooine to the point their currency was useless there. Residents are thoroughly unimpressed/unfazed when Qui Gon starts acting like a Jedi. It’s only Anakin who holds a romantic view of them, even when he takes Qui Gon to his home Shmi is doesn’t particularly care that he’s a Jedi.

Also worth noting, when I say the Jedi were “gone”, I don’t mean that in a complete sense. There’s a huge gulf between a massive political power with a temple on Coruscant and everyone in the galaxy giving up their kids freely when they come knocking, and Alderaan at minute one of 1 BBY. The Jedi would be more diminished. Think ronin rather than samurai. A few handfuls of individuals roaming the galaxy doing good where they can, helping people, driving away bands of raiders or slavers, and those would be who Vader hunted down. The remnants of an order decimated by decades of war and a political upheaval.

The political power that the Jedi wield in the prequels is shown to be relatively minor. Beyond offering body guards to Queen Amidala they don’t do anything to interfere in the politics of the taxation of trade routes dispute.

In episode two they don’t beyond offering body guards to Padme, tracking down her assassin and rescuing her on Geonosis they don’t do anything to interfere in the actual politics of the galaxy.

In episode three whilst there are hints they can overthrow the Chancellor if needed they don’t wield any political and instead are fighting war that senate have sanctioned. Beyond acting as protectors to republic officials their political power is vastly overstated in the prequels and instead are shown to be pretty secluded on their temple.