No, the point is that Mozilla have a philosophical issue with putting patent-encumbered video support into the Firefox code. Flash's relative merits are irrelevant to this topic. Crap as it very well may be, it's installed virtually everywhere, and it's been playing H.264 for years - it also gets installed whether or not you use it to play HTML5 video.

H.264 is widely used, and all the other major browser vendors have signed on to it for future releases. It would be foolish for Mozilla to make a stand on this at the expense of their users - most of them don't care. They'll simply see that their browser doesn't "work", and they'll switch to one that does.

By making Firefox play H.264 through its existing plugin/extension architecture, Mozilla can maintain its stance on the patent issue without losing the goodwill and support of its users, just like they did by adding PNG support to support the move away from the LZW-patent-encumbered GIF, without actually removing GIF support. Firefox makes use of a number of technologies that are subject to patents, and they've taken a pragmatic approach to those. It's not unreasonable to suggest that they do it again.

Most Firefox users have the Flash plugin, the Flash plugin plays H.264. An extension or greasemonkey script could replace <video> tags with a flash video player - patent fees paid for by Adobe, no need for a new browser fork, problem solved? Or is it more complicated than that?