One was to build in explicit support for h.264 in Firefox and for Mozilla to pay the MPEG-LA ~$5million/year in licensing fees.
Another was to punt to the operating system and let gstreamer/directmedia/quicktime do the decode. Even though it would have been without cost to them, Mozilla chose not to do this as part of their moral stand against h.264. This was why they were so sharply criticized.
The third option was to let the Firefox Flash plugin do the decoding, which is what we have today.
Not really; by choosing H.264 they chose only one format to keep their videos in, and relied on Flash to offer it to the desktop browsers refusing to support H.264 natively.
Huh? As I understand it, H.264 was never an option for Firefox due to the patent encumbrance and licensing fees they would incur for distributing it.
The people who chose to use H.264, despite knowing that the second most popular browser wouldn't support it, made twice the work for themselves.