I'm only proposing that we make a desktop environment, the same thing
that KDE and Gnome, are. The only reason I mentioned a "Mozilla OS" is
because we'd probably also want to release distributions for one of
more specific kernels as a whole OS, including with it Firefox,
Thunderbird, and any other applications built with the Mozilla
platform available then. Currently there are plenty of kernels to put
a Mozilla desktop environment on.

Firefox isn't quite a shell on its own. It holds all of the
characteristics of an application, and it would not be so simple, or
quite make sense, to adapt it to a desktop. The best and easiest
solution would be to keep Firefox a browser, extend its use to
browsing the local file system as well, and make a seperate desktop
for managing applications (which includes opening directory views in
Firefox). This is similar to Explorer on Windows, except that Windows
has Explorer and Internet Explorer as seperate applications, even
though they are almost identical. The differences are minor, and I
think unnecessary. Microsoft decided to keep a small apparent gap
between the Web browser and the file browser, having the latter mostly
just exclude a few Web-specific toolbar buttons, like "home". Explorer
is also the desktop, including the taskbar, start menu, etc... I
believe Konqueror is a better example of a file/web browser as part of
the KDE desktop environment, but seperate from the rest of the shell.

All this leaves is to make a desktop, extend Firefox to display files
and folders better, and add features for file manipulation (move,
copy, delete, etc...) to Firefox (this is a much needed improvement,
that I suspect is probably already being done since Firefox currently
cannot do this with FTP either without an extension like FireFTP), and
fill in the few GUI elements from XUL that are currently taken from
the native GUI (top-level windows, file selector, basic text
rendering?).