Careful, mode 2 means reject all or fall back to accept all if there is no Reject All button. So use that only if cookies are disabled or otherwise controlled, for example by an AddOn like Cookie AutoDelete. If not, rather use mode 1 that hits only a Reject All button if available but ignores others.

See https://community.mozilla.org/de/campaigns/firefox-cookie-banner-handling/ and https://github.com/mozilla/cookie-banner-rules-list

Oh boy this is great for privacy but it’s also going to break a lot of academic shit that relies on cookies for authentication

So, firefox achieving feature parity with lynx? :^)

According to Mozilla setting both to the value 1 is the better idea. The fallback then won't be "Accept all".

I prefer an "accept all" approach, refusing all of them will lead to a degraded experience

Except abusers like Facebook who go in their dedicated isolated container

Does "Reject All" also object to legitimate interest?

or use Consent-O-Matic to automatically reject all the non-essential cookies https://addons.mozilla.org/en-US/firefox/addon/consent-o-matic/

This isn't anything new. Firefox lost the lead ages ago (thanks, Mozilla):

https://brave.com/privacy-updates/21-blocking-cookie-notices/