Thanks for submitting this! There's a few reasons why this work isn't really something we can ship as it is, but the biggest is one you've already pointed out, which is update support. And as you've also pointed out, it doesn't appear solvable. In fact in the past when we've looked into shipping a more feature-complete MSI, we identified the same problem and it effectively stopped those efforts; we're not willing to ship something which creates an installation that cannot be updated in place. Even using MSP files is difficult because we have an existing update system (which we also use on other platforms) that those really don't fit into. Much of this could be worked around by treating the MSI and its patching system as its own independent thing separate from the existing install/update stack, but we don't have the resources to properly maintain two independent stacks like that.
Again, thanks for the submission, and I hope it can prove useful to you in your own work (or others'). It just isn't something that we're able to ship as an official Firefox installer.