While I agree with your main point that the eventual failure of the browser plugin model wasn't as obvious in 2007 as it is now, I could pick different dates and show the opposite.
The video tag was invented in 2007, the same year the iPhone was released. Android followed in 2008, and it was becoming clear that the mobile web wouldn't play well with browser plugins. At the time, there was also a general trend to move away from proprietary standards (ODF was standardized in 2007), and it was obvious from the very beginning that Silverlight would be a closed-source, hard-to-reimplement, patented, Microsoft-supported-platforms-only thing.
In the end, it probably boiled down to developers not wanting Microsoft to gain control of the web ever again.
The video tag was invented in 2007, the same year the iPhone was released. Android followed in 2008, and it was becoming clear that the mobile web wouldn't play well with browser plugins. At the time, there was also a general trend to move away from proprietary standards (ODF was standardized in 2007), and it was obvious from the very beginning that Silverlight would be a closed-source, hard-to-reimplement, patented, Microsoft-supported-platforms-only thing.
In the end, it probably boiled down to developers not wanting Microsoft to gain control of the web ever again.