The .html() function will not get the updated DOM attributes. You have to manually get the updated attributes.. check below demo,
DEMO: http://jsfiddle.net/skram/CqPkP/2/
Full Code:
$(document).ready(function() {
    $('#click').live('click', function() {
        alert($('#test').formhtml())
    })
});
(function($) {
    var oldHTML = $.fn.html;
    $.fn.formhtml = function() {
        if (arguments.length) return oldHTML.apply(this, arguments);
        $("input,button", this).each(function() {
            this.setAttribute('value', this.value);
        });
        $("textarea", this).each(function() {
            // updated - thanks Raja!
            this.innerHTML = this.value;
        });
        $("input:radio,input:checkbox", this).each(function() {
            // im not really even sure you need to do this for "checked"
            // but what the heck, better safe than sorry
            if (this.checked) this.setAttribute('checked', 'checked');
            else this.removeAttribute('checked');
        });
        $("option", this).each(function() {
            // also not sure, but, better safe...
            if (this.selected) this.setAttribute('selected', 'selected');
            else this.removeAttribute('selected');
        });
        return oldHTML.apply(this);
    };
    //optional to override real .html() if you want
    // $.fn.html = $.fn.formhtml;
})(jQuery);
Ref: jQuery html() in Firefox (uses .innerHTML) ignores DOM changes