This is nothing to do with what formats *can* be supported; any user is free to add extra
codecs to their browser. This is about what codecs will ship with browsers, and therefore what
codecs publishers can assume are present.
The question that needs to be asked is not whether Theora is better than H264, but is it
better than nothing? And the answer is clearly yes: it is quite a reasonable default to
provide to users. Those who pay for bandwidth, or have limited bandwidth, and can legally use
an H264 implementation can install one later if they wish.
Flash video sucks, but it is very widely used, just because it is convenient. And because it
is widely used, publishers offer their video in that format. If publishers knew that Theora
would be available in their users browser, they would provide that format.