I don't think the technical aspect of what they've done is flexing muscle. It's interesting for sure, but in the end, it's a plugin (a very cool one, yes).

The muscle flexing is that they're willing to subvert a competitors product instead of just promoting their own product as a superior offering.

Can you imagine the outrage if Microsoft had done this and offered a plugin to Chrome or Firefox that would make them render things just like IE does? If you're having trouble imagining such a scenario, think back to the outcry when people discovered the .Net plugin for Firefox, and that wasn't nearly as invasive.

Google is drawing a line in the sand that essentially says "You can do things your way or our way, but if you don't like our way we'll find a way to make your users do it our way."

To me that seems like a pretty serious escalation.