That environment option is no longer required as Firefox has defaulted to using Wayland if available since v121.0 was released in December, 2023:
- On Linux, Firefox now defaults to the Wayland compositor when available instead of XWayland. This brings support for touchpad & touchscreen gestures, swipe-to-nav, per-monitor DPI settings, better graphics performance, and more.
Note that due to Wayland protocol limitations, Picture-in-Picture windows require an extra user interaction (generally right-click on the window) or a shell / desktop-environment tweak. See bug 1621261 for related discussion and tracking, this post for a KDE configuration, and this extension for GNOME. It is also a known issue that windows are not correctly placed when restoring a previous session on launch.
I mentioned it in the Stable update thread at the time: