When using observe_form, there’s a sneaky nastyness. (Rails 1.2.3) It’s a bit inconsistent. Hopefully this will clear it up.

With no ‘update’ or ‘with’ parameter then the values aren’t passed:
new Form.Observer('theform', 1, function(element, value) {new Ajax.Request('/controller/action', {asynchronous:true, evalScripts:true})})

Surely this is a bug? It should include ‘parameters:value’.

Using – :with => ‘values’
new Form.Observer('theform', 1, function(element, value) {new Ajax.Request('/controller/action', {asynchronous:true, evalScripts:true, parameters:'values=' + value})})

Getting there but still doesn’t quite work. Try it and you’ll see why.

Using – :update => {}, and no ‘with’
new Form.Observer('theform', 1, function(element, value) {new Ajax.Updater({}, '/controller/action', {asynchronous:true, evalScripts:true, parameters:value})})

This now works as it’s changed to use the Ajax.Updater passing the parameters as we wanted in the first attempt.
I hope his saves someone some time :-)

Credits due here for the empty hash fix: http://wiki.rubyonrails.org/rails/pages/observe_form+-+Passing+Parameters