s.js

/* ------- */
// Clean mess from previous session
Components.utils.import("resource:///modules/source-editor.jsm");
let nbox = gBrowser.getNotificationBox();
while (nbox.lastChild.id == "foobar-container" ||
       nbox.lastChild.id == "foobar-splitter") {
  nbox.removeChild(nbox.lastChild);
}
/* ------- */
// Build container
let container = document.createElement("vbox");
container.setAttribute("flex", "0"); // This makes it take only the required height
container.id = "foobar-container";
container.setAttribute("pack", "start");
container.setAttribute("style", "max-height:0px;overflow:hidden");
container.height = 0; // This makes its height 0 which is then adjusted later to fit one line

let splitter = document.createElement("splitter");
splitter.className = "devtools-horizontal-splitter";
splitter.id = "foobar-splitter";

nbox.appendChild(splitter);
nbox.appendChild(container);

/* ------- */
// Editor!!!
let input = new SourceEditor();
input.init(container, {
  initialText: "/* input */",
}, autofitEditor);
input.editorElement.flex = 0;

function autofitEditor(e) {
  let lineHeight = e._view.getLineHeight();
  e.previousLineCount = 1;
  // This call will make the 0 height container to be of appropriate initial height
  setEditorSize(e, lineHeight);
  e.addEventListener(SourceEditor.EVENTS.TEXT_CHANGED, function() {
    let count = e.getLineCount();
    if (count != e.previousLineCount) {
      e.previousLineCount = count;
      setEditorSize(e, lineHeight * count);
    }
  });
}

function setEditorSize(e, height) {
  container.style.minHeight =
  container.style.maxHeight =
  container.style.height =
  e.editorElement.style.minHeight =
  e.editorElement.style.maxHeight =
  e.editorElement.style.height = (3 + height) + "px"; // 3 being the margin
}

If the max-height and height of container are not set 0 initially (as in previous version), then the editor height jumps from around 50px to 17px. 50px is the initial height before the first setEditorSize call is made.
So I set the initial heights to 0, so that the jump is not visible.