Preferences

But I don’t want full screen, I want it to take up the full window that I have allocated to the browser, while still allowing me to multitask in other windows.

You can make firefox fullscreen _within the window_ by changing a flag in about:config ... full-screen-api.ignore-widgets (set to true)

then, when you press `F` on a video, you will remove all firefox 'decoration', just like fullscreen mode, but it'll respect whatever position and size you have set for the browser.

That's a truly excellent tip, I definitely need to go tweak that setting.
As an additional tip, if you want to get rid of the "You are now fullscreen" (or whatever it says) that comes across the top... you can set the following to 0

  full-screen-api.transition-duration.enter
  full-screen-api.transition-duration.leave
  full-screen-api.transition-duration.timeout
  full-screen-api.warning.delay
  full-screen-api.warning.timeout
these are all involved in the popup when you fullscreen a video
What a wonderful but bizarrely named feature flag. Thank you!
I love Firefox's picture-in-picture mode for this exact reason. I think there is an extension for Chrome also.
It's in Chrome natively. But in Youtube you have to right click on the video twice.

First to trigger the Javascript context menu, and again to trigger the native one which will have the "Picture in picture" option. And there are actually two different native context menus, so if the PiP one doesn't pop up, you might have to try multiple times.

Very weird UX instead of just giving us a PiP button under the video.

It’s not weird UX when you consider why it’s so hidden: to increase “engagement” metrics (i.e. make it more likely for you to click on other videos, view/interact with ads/etc). Same reason the feature is unavailable on iOS (even though it’s been natively supported by the OS for years), unless you pay whatever google wants for a premium YouTube subscription.
There’s a great app called PiPifier, which allows you to use PiP for free on iOS.
That behaviour is so weird that it feels like an oversight. It's like we're not supposed to be able to access those options at all. A lot of people are explaining it by saying PIP mode lowers engagement so they hide it. But then why have that as a built in feature at all?
Maybe try the T key for theater mode!
this is my greatest nitpick.

Any website with a video player should include a "full window" control

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