I can confirm that this occurs in master - http://jsfiddle.net/2DMUW/2/. And it happens in all browsers, this isn't specific to Firefox. As a workaround you can call ui.draggable.remove() in the drop callback before removing the parent node.
The core issue is this block in the _mouseStop method of jquery.ui.draggable.js:
//if the original element is removed, don't bother to continue
if((!this.element || !this.element.parentNode) && this.options.helper === "original")
Issues occur if the stop methods are called on a node that is no longer on the DOM (which is what is happening here). This appears to be the code to keep that from happening. In this situation this.element and its parent both exist, but its grandparent doesn't. I believe that block should change to ensure the node is actually on the DOM. I'll work on a pull request for this.