Yeah, needs fixing and doesn't make sense but precisely because that isn't how it was in PnP
Balance wasn't needed in PnP to stand up and thus is indeed broken in DDO by allowing a huge bonus.
We just added that it was also broke by nerfing PnP on the whole mechanic of being prone.
The point on wether you needed balance for knockdown is more off topic but double checked that balance skill isn't used in PnP for knockdown.
The d20 "balance skill" is only intended to "walk on a precarious surface" from the SRD entry.
Second, the "skill" as an ability doesn't cover that scenario because you'd just throw ranks or cheap enchantment on it without spending on the more costly physical attributes of str and dex.
(such is the case of trip but also sunder, and in pnp disarm, grapple and others left out from ddo)
Now the thing is that we still call "balance" the ability to keep the body's equilibrium.
Thus it is not that balance is right or not for falling but that the particular "skill" as an scoring ability isn't the right one to use for it.
In PnP you used dex and str because that's what helps you with balance in the real world, hence the comments on the dog and all.
Skills on d20 reflect training (including intimidation and such) thus while a character without it would still be hard to trip if agile enough.
Balance still describe the power of not falling but the name of the balance skill is misleading because it does only cover one particular task.
For the knockdown task you rather need some physical prowess instead of actual training.
I still believe the balance check in ddo was intended as a replacement of the chance of getting attacked while prone or while standing up.
Since number crunching is much more important in ddo than in pnp (aside roleplaying value) the balance skill does cover up this need very well.
If only ddo designers could make some things less streamlined and more flavored there could be other alternatives to tweaking d20 to suit the mmo.
A simple one for trip was to just let you up but had an appropiate penalty on AC to get you hurt from being attacked prone.
Edit: Reworded.