Mozilla is unhappy because the use of browser engines other than WebKit will be restricted to the EU, forcing them to develop two different apps.
For an independent browser like Firefox, managing two browsers is not easy, so it can be forgiven that this could be seen as almost harassment.
Also, the fact that the use of browser engines other than WebKit is limited to iOS means that the use of WebKit is still forced on iPadOS, which also increases the effort for Mozilla.
Honestly, Mozilla doesn’t even have the resources to maintain a proper WebKit-based version of Firefox on iPadOS, when a large amount of the work is handled for them by Apple. (See, for example, the fact that it still does not support multiple windows, a feature that has been available since 2019.) It would seem a mistake for them to try taking on a much larger load of work when they can’t handle what they’ve already taken on.
It’s not like they’d develop a new engine for iOS. They already have one which can now be used for iOS as well – but not everywhere.