David,
*snip*
>Is there an easier way?

Within the procedure file itself, you could use _Screen.ActiveForm as a substitute for THISFORM. It should hold a reference to the form currently active unless you are using ActiveX controls on the form. Then it may hodl a reference to that instead. Check the Baseclass property to make sure it is Form and you should be okay.

>Is it still standard practice to use a seperate .prg procedure file, with code in the form such as SET PROCEDURE TO myprocedure.prg?

It depends on the developer. Some go all out OOP and create library objects that have methods insetad of procedures. The objects are added at design or run-time to the form and the THISFORM reference works.

>Is it somehow possible to include the code in procedure.prg as part of the form?

See above.