Some additional thoughts: On2's latest video codec is VP8, which replaces VP7. From what I've read, VP8 might provide a better quality-size ratio than H.264.
If we're optimistic, Google would develop a better format+codec for YouTube, especially with the higher quality "HD" videos around. Google would release this as a free codec to be included in Firefox. Of course, Google might just want leverage against MPEG LA's royalties after 2010.
