The point here is not to build an OS. The point is to improve web APIs so that web apps can compete with native ones, and do it in an open fashion so that all web browsers can implement the new APIs. ChromeOS has done some of this, but neither far enough nor openly enough (what ChromeOS extensions are working on becoming cross-browser standards?).

In that case, wouldn't it be more effective to throw Mozilla's weight behind an open source mobile Operating System that actually has a chance of going mainstream ala MeeGo?

It depends on the goal. If the goal is to have an open source mobile operating system, then maybe. If the goal is to have it not matter which exact mobile operating system you use, so new mobile operating systems have an easier time entering the market.... then no.

In case it's not clear, Mozilla is not building a kernel or anything here. They're just building capabilities for web apps to be able to do whatever mobile apps can do now.

You sir have hit the nail on the head. The article reads as is they invented something revolutionary. I do think there is great potential in browser os market and a little competition is all that's required to pave the way for the 'next big thing'! This might just do good for the ChromeOS.