You can indeed simplify that a fair bit:
var myClass = Class.create({
initialize: function() {
var self = this;
// To demo that we keep the instance reference, set a
// property on the instance
this.message = "Hi there";
$('formid').getElements().invoke("observe", "blur", blurHandler);
function blurHandler() {
// `self` references our instance
// `this` references the element we're observing
self.validateEl(this);
}
},
validateEl: function(el){
// validate $(el) in here...
// note that because of the way we called it, within this function,
// `this` references the instance, so for instance:
this.foo(); // alerts "Hi there!"
},
foo: function() {
alert(this.message);
}
});
That uses invoke (as you suggested) and a named function for the handler (doesn't have to be named, but I find that it's very helpful to have your functions have names). The handler is a closure. In the initialize function, I use a variable to point to this because the variable will then be available to the closure. (I called it self because that's a standard practice when aliasing this for this reason.) The handler makes use of Prototype's native functionality of setting this within an event handler to the element being observed. When we call validateEl via the closure's self reference, we're calling it as a member function as per normal, so within validateEl, this refers to the instance.
Speaking of named functions, your initialize and validateEl functions are both anonymous, which means on call stacks and such in debuggers, you'll just see "(?)" rather than a nice, handy name. I always recommend actual named functions; more here.