Hmm... What is the path you're indicating to mozilla and how are you indicating it? Mozilla is (for me and I think by default likes to be) installed in /usr/local/mozilla. There was some old mozilla-1.0.1 stuff around that I deleted. (That's when I found out how to change all this!
This is what I have in the Gnome file:
default-show=/usr/local/mozilla/mozilla -P default "%s"
This is the path in my shortcut to Mozilla:
/usr/local/mozilla/mozilla -P default
Hope this helps