This may be true, as Firefox 3 has a new Download Manager which is also very difficult to disable.
After a few hours of frustrating hacking and a lot of help from #extdev on irc.mozilla.org, I have hopefully disabled the chance of a jail break via the downloadManager. This (more) "locked down" behaviour should be better than what it was in Webconverger 2.
webc-3.0b3.mini contains these improvements to the kiosk extension. However, I have noticed that on my test machine (Thinkpad X40) ALSA sound playback does not seem to work with these new images. Does sound playback work for you on YouTube? Please let me know.
Two steps forward, one step back. :)