The WebDAV Launcher works with Firefox 6 as of CONF-23097 but doesn't work quite properly with Firefox 7, it seems. It'll install fine, but clicking the "Edit Document" button in Confluence doesn't actually do anything now (you click it, and nothing happens).

The version of the WebDAV Launcher that comes with the Office Connector (and is downloaded from update.atlassian.com) doesn't actually work at all with Firefox 7, you get an error saying it's not compatible. Manually downloading the addon allows installation, but then you run into the initial problem I described, where the Edit Document button doesn't work.