I spent several days composing a lengthy post on this topic and just as I was getting ready to put it up, I ran across this slashdot comment from Mozilla's Robert O'Callahan.
If not supporting H.264 isn't reducing H.264 usage, but reduces the influence of Firefox by turning users away from Firefox, and increases the usage of Flash vs HTML5 video, then not supporting H.264 is a net lose for freedom and standards on the Web and supporting H.264 is the right thing to do for our mission.
That's basically my entire 7 paragraph post in one sentence. I'll save you reading what I wrote because this is much shorter and clearer.
ROC leads Mozilla's multimedia efforts and is also a fierce advocate for video freedom on the Web so I listen very closely when he speaks on these issues. I believe that in this one sentence he's made a convincing case that supporting H.264 in the <video> element in Gecko is the right thing to do for Mozilla's mission.