High-resolution spectroscopy with FUSE and HST STIS of atomic and molecular velocity stratification in the nebular outflow of M27 challenge models of the abundance kinematics in planetary nebulae. The simple picture of a very high speed ($1000 km s À1 ), high-ionization, radiation-driven stellar wind surrounded by a slower ($10 km s À1 ) mostly molecular outflow, with low-ionization and neutral atomic species residing at the wind interaction interface, is not supported. Instead, we find vibrationally excited H 2 intermixed with mostly neutral atomic species at a transition velocity (33 km s À1 ) between a fast (33Y65 km s À1 ) low-ionization zone and a slow (P33 km s À1 ) high-ionization zone. Ly fluorescence of H 2 has been detected, but far-UV continuum fluorescence has not. The diffuse nebular medium is inhospitable to molecules and dust. Maintaining a modest equilibrium abundance of H 2 [N (H 2 )/N (H i)T1] in the diffuse nebular medium requires a source of H 2 , mostly likely the clumpy nebular medium. The stellar SED shows no sign of reddening [E(B À V ) < 0:01], but paradoxically H /H indicates E(B À V ) $ 0:1. The enhancement of H /H in the absence of dust may result from a two-step process of H 2 ionization by Lyman continuum photons followed by dissociative recombination [ H 2 + ! H þ 2 + e À ! H(1s) + H(nl )], which ultimately produces fluorescence of H and Ly . In the optically thin limit at the inferred radius of the velocity transition, we find that dissociation of H 2 by stellar Lyman continuum photons is an order of magnitude more efficient than spontaneous dissociation by far-UV photons. The importance of this H 2 destruction process in H ii regions has been overlooked.