The circulating advice is to force all IDNs to be displayed in punycode by setting network.IDN_show_punycode to true. This is probably acceptable for most of our users (the vast majority of TenFourFox users operate with a Latin character set), but I agree with Gerv's concern in that Bugzilla entry that doing so disadvantages all other writing systems that are not Latin, so I don't feel this should be the default. That said, I also find the current situation unacceptable and doing nothing, or worse relying on DNS registrars who so far don't really care about anything but getting your money, similarly so. While the number of domains that could be spoofed in this fashion is probably small, it is certainly greater than one, and don't forget that they let the proof-of-concept author register his spoof!
Meanwhile, I'm not sure what the solution right now should be other than "not nothing." Virtually any approach, including the one Google Chrome has decided to take, will disadvantage non-Latin scripts (and the Chrome approach has its own deficiencies and is not IMHO a complete solution to the problem, nor was it designed to be). It would be optimal to adopt whatever solution Firefox eventually decides upon for consistency if they do so, but this is not an issue I'd like to sit on indefinitely. If you use a Latin character set as your default language, and/or you don't care if all domains will appear in either ASCII or punycode, then go ahead and set that pref above; if you don't, or consider this inappropriate, stay tuned. I'm thinking about this in issue 384.
By the way, TenFourFox "FPR0" has been successfully uploaded to Github. Build instructions to follow and the first FPR1 beta should be out in about two to three weeks. I'm also cogitating over a blog post discussing not only us but other Gecko forks (SeaMonkey, Pale Moon, etc.) which for a variety of reasons don't want to follow Mozilla into the unclear misty haze of a post-XUL world. To a first approximation our reasons are generally technical and theirs are primarily philosophical, but we both end up doing some of the same work and we should talk about that as an ecosystem. More later.