In this case, the solution is to simply reinstall the browser.
Windows update interfered with Firefox – Both parties (Microsoft and Mozilla) acknowledged that one particular Windows 10 update ended up breaking the ‘set as default’ functionality for Firefox.
This is typically reported to appear in cases where the user just removed a browser hijacker or other type of adware/malware that infected Mozilla Firefox.
Bad Firefox installation – This issue is confirmed to occur in those cases where a corrupted / incomplete Firefox installation is causing Windows to disregard your ‘set as default requests’.