goals of the FSF

I doubt anyone at the FSF thinks that having logic in ROM is *better* than having it in upgradable software. But they want to have an endorsement that says "this device uses only free software", and that means that they need to define "free" and "software". This is a case where the device developers have decided that rather than making the firmware free, they will make it not-software.

I can't see any way to define "free software" that would let you avoid this kind of loophole. What would you do differently? The result is ugly, but at least it's clear that actually freeing the firmware would be a better solution, so the endorsement is serving its purpose of pressuring people to work on that. The FSF certainly has been always been willing to accept short-term inconvenience in maintaining a long-term emphasis on freedom.