Gandalf the Grey fought the Balrog, allowing the Fellowship to escape Moria. Both fell into the abyss, but the battle continued at the peak of Zirakzigil. The duel between the two Ainur ended with the Balrog's death. While Gandalf also died, he was later "sent back" by the Valar, as Gandalf the White.
The only recorded instances of Balrogs having been slain are Gandalf's slay of Durin's Bane, Echtelion's slay of Gothmog and Glorfindel's slay of an unnamed Balrog.
Glorfindel fought the Balrog and succeeded in slaying the monster, but was himself mortally wounded. His body was recovered by the great eagle Thorondor and buried under a stone cairn, where afterward grew yellow flowers.
In all of Tolkien's text I've read, there are three people who have killed a Balrog. Ecthellion, Glorfindel and of course Gandalf. All of these fights ended in a draw with all three sacrificing their lives for the deed.
Gandalf was able to kill the Balrog, but he never considered fighting Smaug. Instead, they sent Thorin and his company of dwarves to do the job while he dealt with the Necromancer in southern Mirkwood.
Secondly, Balrogs were the epitome of malice and power while Sauron only ever won one of three fights he ever had. Sauron was the great deceiver. His power lies in planning, subterfuge, manipulation, and corruption.
The Elf Ecthelion leads the charge against the Orcs, and fights Gothmog, the greatest Balrog; they wound each other and both fall into the king's fountain in Gondolin; both drown.
For more than five millennia, the Balrog hibernated in his deep hiding place at the roots of the mountains in Khazad-dûm. He remained undisturbed throughout the Second Age and most of the Third, before the mithril-miners of dwarf-King Durin VI awoke him in T.A. 1980.
Although both the Balrog and Smaug are creatures of fire, and Gandalf is able to match them thanks to the power of his fire ring, defeating the Balrog takes far more spiritual prowess, which is why Gandalf is able to essentially 'level up' and comes back as Gandalf the White, whereas defeating such an immense physical ...
The company fled with Gandalf, but the Orcs and the Balrog, taking a different route, caught up with them at the Bridge of Khazad-dûm. At the Bridge, Legolas instantly recognized it as a Balrog, and Gimli recognized it as Durin's Bane.
So, when Gandalf agreed with Frodo's decision to travel through Moria, he knew that something could be hiding there. Yet, he had no reason to think that it would be something as awful and powerful as a Balrog. Only King Dain Ironfoot knew that Durin's Bane was a Balrog.
In the end Tolkien stated that there were probably "at most" seven Balrogs: In the margin my father wrote: 'There should not be supposed more than say 3 or at most 7 ever existed. '
The Battle of the Peak was Gandalf's name for his climactic battle with the Balrog known as Durin's Bane, on the peak of the mountain called Silvertine. Gandalf pursued the Balrog from the deepests dungeons of Moria to Durin's Tower, climbing through the whole Endless Stair.
Oh, yes, there are creatures more frightful than Balrogs in Middle Earth. Ungoliant who was able to cry havoc in all Valinor is easily more terrifying than Balrogs, even Morgoth feared its gigantic and hideous form. It took a group of Balrogs and Morgoth himself resisting Ungoliant's attack to make her flee.
Melkor is the most powerful of the Valar but he turns to darkness and is renamed Morgoth, the primary antagonist of Arda. All evil in the world of Middle-earth ultimately stems from him. One of the Maiar of Aulë betrays his kind and becomes Morgoth's principal lieutenant and successor, Sauron.
It was said that Morgoth hated and feared the House of Fingolfin most among the Houses of the sons of Finwë, especially Fingolfin's son Turgon, as it was prophesied that his doom would come from the House of Turgon.
Gothmog, one of the first Balrogs to become Morgoth's allies in the First Age, is regarded as the most powerful Balrog in Middle-earth. As the High Captain of Angband, he is given the title 'Lord of Balrogs'. Although he carries a fiery whip to battle just like the rest, he is also renowned for having a large black ax.
Gimli didn't know about Moria's fate because there had been no communication between Erebor and Moria for 25 years, and the Dwarves were hopeful and did not want to accept failure until there was certain news.
First off, it simply wasn't his job and doing so would have bordered on breaking the mandate of the Istari. He -- along with the other wizards -- was sent from Valinor to oppose Sauron by stirring up resistance amongst the free peoples of Middle-earth.
6 Gandalf. As previously stated, Gandalf is a Maia and is therefore superior to Elves regarding power. Still, this isn't to say that an elf couldn't develop enough skill and power to defeat a Maia. As a bearer of one of the Three Elven Rings (Nenya), Galadriel would have an edge against Maiar like Saruman and Radagast.
Balrog vs dragon, as a general setup, is simple to answer. Balrog. Even in the earliest writings, when Balrogs were much, much weaker and more numerous than they are in the conceptions you probably identify with them (as in, what Gandalf fights), Balrogs are stated outright to be more powerful than dragons.
