The only way I see moon based observatories as practical is:

1) we have a permanent lunar presence
2) this presence is established enough that it can make the observatory mostly from local materials

as for having the scope enclosed, (I assume that you are imagining a 'glass dome'), well you lose much of the advantage of being on the moon... it the 'dome' is flawless and optical quality then you could compensate for the distortion from the dome with adaptive optics, if its in an atmosphere you may need further compensation... but you went to the moon to avoid needing AO.

any material used to enclose the scope will restrict the available wavelengths, fused silica will cut out the UV and the long IR- (Remember, one of the advantages is the expanded wavelength range) plus it will get pitted and itself get dusty... studies really need to be done to determine how much dust is in the lunar 'atmosphere'... I think creative earth based studies of the moon could nail this down, if they havent already...

The moon is probably a more stable body than the Earth, but the stability of the Earth is not a serious problem for current observatories (aside from 6.0 earthquakes in hawaii)... It is the vibration of the equipment in the observatory that is the problem. People spent a lot of time hunting down sources of vibration at observatories... Thermal issues would also be greater. Wind shake wouldnt be a problem tho... :)

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On the other side of the coin, the reduced gravity means the support structure can be less, the mirrors can be thinner, a segmented primary could be quite light indeed, and you could probably also do limited viewing during the lunar 'day'.... but these are advantages that orbital observatories also have.

Barring an extensive permanent presence on the moon I do not see this as remotely practical- I do promise that if we get such a presence I will NOT complain if the want to build a few scopes! :) I would send my resume immediately, but they wouldnt need a laser guide star....