The reason Firefox asks you if you would like to open the file with WMP is that your browser is trying to open an application, and some viruses will do that, so Firefox asks if you know about it before it does anything.

I would download the latest plugin for WMP for Firefox as you have upgraded the player, then you will need to upgrade the plugin also. If you still get problems then I would roll back to WMP 10. I had a few problems with WMP 11 myself so I just went back to WMP 10, and have told others to do the same when having video problems and this seems to have fixed it.

As always Microsoft seem to be all too eager to release software that isnt 100% tested and approved.

Also you have to remember that Firefox is freeware software and Microsoft will NOT test any of their new software with it. (It is after all a product in direct competion with IE and in my opinion Firefox wins be a country mile)