[Keeper of Dol Guldur]

True, the Balrog probably couldn't or wouldn't wield such a thing. The power of the sun wasn't something a creature out of the dark days could really handle. So what would it do with such a trinket? Probably destroy it . . . that seems natural for a Balrog. Maybe claim it for himself without wielding it (if it could be done) and learn the locations of Imladris and Caras Galadhon, then send out orcs, or go for vengeance against the son of Earendil. I have no idea how the mind of Durin's Bane works, so who knows.

The Balrog would certainly not be on the 'same team' as Sauron. It wouldn't kneel to a peer. More importantly, it wouldn't take that kindly to Sauron anyway, it'd probably think he was a traitor. After Huan ripped his throat out, Sauron fled and went AWOL, and basically let Luthien and Beren slip into Angband undetected, steal a Silmaril from the Dark Lord, and ended up meaning the death of the master's pet Carcaroth too. Plus, the Balrog clearly had it's own set limits and was master of its own realm . . . Lord of Moria. Even the orcs called it by a generic evil title like they did Lugburz or Sharkey, or 'the Eye', by calling the Balrog 'Ghash'. He and Sauron may have been aware of eachother, but they certainly weren't on speaking terms. Keeping respectable differences, more like it. Durin's Bane permitted Sauron's orcs to inhabit Moria, but they kept clear of him.

Oh and personally, I think Gandalf knew he'd kill the Balrog when he stopped on the bridge. After all, it was Gandalf that chased it from deepest foundations, all the way at it's slimey heels up the stair, and out onto the tower, where probably weakened by the sunlight it got it's *** handed to it, burst anew flame or no. Gandalf had two elf-weapons of the highest Noldorin make, I don't think he was worried about how 'big and strong' the Balrog was, he was just worried for the Fellowship's safety with him gone.