First of all, I think
Sauron at the peak of his power (with
the ring on his finger) would be far more terrible than a
Balrog. Let's all remember that in the days of old man
Morgoth, Sauron was his lieutenant, while the
Balrogs were his subordinates and occasionally his bodyguards. I think that speaks for itself... Sauron would only have to send his ring wraiths and I am sure even a Balrog would begin to fade.
I think that Sauron's main strength was that of a tactician. He only did show up in the war against the Last Alliance out of arrogance. He would of course supervise the battle, but nothing more. When the power of the Ring gives him such immense power, he wouldn't need anything else, the list of allies is great enough to cover everything. I am sure that not even
Gandalf the White would have been able to face all
the Nine at the same time. Not fear would have made him
bow but perhaps the
black breath or their blades could have had an effect upon him. Sauron was not exactly your perfect example of fair play and he would use every trick he possesses to finish those who threatened him.
But direct confrontation is doubtful... Sauron was not stupid and his arrogance was a little shrunk by his last outburst. I am not too sure that Gandalf would lose the fight in a direct battle, but Sauron would never have allowed it!