Yes.

There are no limits* to how high a pixie may fly, provided that they end their turn only one square above the ground. However, if they do end their turn above their altitude limit they fall with the consequences laid out for falling (1d10 damage/10 foot of drop).

*The theoretical maximum height a pixie may reach on their turn (with no extra movement trickery) is 8*3 + 1 or 25 squares high (run 8, trade standard for another run 8, action point for another run 8, +1 for starting height), that's 125 ft at the end of which they would fall. Falling says to subtract the creature's fly speed so that leaves us at 95 feet of fall, meaning 9d10 falling damage.

In this section, it says

This rule is helpful to a flier that is knocked prone but is still conscious and has a current flying speed that is greater than 0 feet. The rule is designed to simulate the creature flapping its wings furiously or taking similar measures to slow the velocity of its fall.

Meanwhile, the rules for flying say:

If a flying creature is knocked prone, has its speed reduced to 0, or is otherwise deprived of the ability to move, the creature falls, unless it has the ability to hover or it is being held aloft by magic, such as by the fly spell.

... so, there are different ways to knock a flying creature out of the air. Note that the prone condition doesn't reduce your speed — and it's clear that that's the case that the new optional rule really applies to. In that situation, the creature can't fly and falls, but can flap or take whatever measures. The rule notes that if the fall continues for more than one turn (that is, more than 500 feet), a "prone" creature with a fly speed can recover. Other more powerful means which reduce the target's flying speed to 0 still mean a dangerous fall.

But, also note that Earthbind is not one of these more dangerous situations, since it explicitly gives a soft landing:

An airborne creature affected by this spell safely descends at 60 feet per round until it reaches the ground or the spell ends.

(The text does not specify "no damage", but it's implied by "safely" — and note that this is the same rate that Feather Fall provides.)

So, to directly answer your question: being prone has no effect on the calculation. As the optional rule says, subtract the creature's flying speed from the distance fallen and then calculate damage as normal (1d6 bludgeoning damage per 10 feet) for the remaining distance.