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WinXP incompatibilities Rated 3 out of 5 stars
This add-on may work well on Aero themes, but not on WinXP themes (official and modified), at least for me.
Here's what happens: http://img37.imageshack.us/img37/6546/28000947.jpg
The tab bar is literally put on top of the titlebar, not considering its background.
Instead, the background should be like this http://img835.imageshack.us/img835/6885/53757622.jpg , just like when you have FF maximized and the tab bar is on the titlebar with that glass effect by default.
(NOTE: This is the WinXP theme titlebar background/color without any effect http://img193.imageshack.us/img193/6973/84513293.jpg )
I suppose that this is not a problem on Aero because the titlebar and the tab bar have the same background, the Aero glass effect, but on WinXP this doesn't happen, the titlebar has a color (background) defined by the OS theme and the tab bar (when not in the titlebar) has a color defined by Firefox's theme.
I found the same bug to happen with a Stylish style/script that puts the bookmarks toolbar on top http://img560.imageshack.us/img560/1002/89304710.jpg , but then there's another Stylish script that enhances the last one and fixes that bug (although not adding the glass effect that Firefox adds by default to the tab bar/titlebar combination) http://img844.imageshack.us/img844/940/92489031.jpg .
Here are the Stylish styles/scripts, so you may want to look at their code (specially at the 2nd's that partially fixes the bug) for clues:
Nonetheless, it's a good extension to save more vertical space when working with the browser's window non-maximized, and should be a default Firefox feature/option.