Moon 861 amp with a McIntosh C12000 preamp - do I set the switch to ac or dc on the Moon?

I don’t know of your preamp having issues with outputting DC, generally speaking.  If you’re really concerned you can measure the DC output with a multimeter across the output terminals with the preamp on but no output signal playing.  I would think the AC setting would be correct.  If you’re still not certain contact Moon and ask them, they would know best.

If your amps are bought used or old you should check for DC output, both pre and power.

DC can blow your speakers.

Plenty of vids on YT easy to do.

AC/DC COUPLING
switch to enable the input to block DC signals
AC coupling is useful with preamps suspected of outputting DC (due to age or design) or if the amplifier frequently enters
DC protection mode

I wouldn't use the switch I'd check it and get it fixed as necessary