in Fellowship remains to this day one of the coolest things i've ever seen in a film. And the follow-up in Two Towers only adds to the coolness, especially when it finally falls.
Smaug was a cool design, and his scene with Bilbo was great, in the end he's still just a dragon, and the scene with him and the dwarves running about in Erebor is one of the worst things in all the films (and films in general), so that takes him down a notch.
Because Smaug is a character - a lovely character. I think while Smaug is probably the best on-screen dragon to date, being quite classical in its design (which is great) the balrog was something fresh and still has such an interesting design being massive but also being shadow-y. A very difficult design task.
So, design, Balrog wins. However, a balrog version that in the performance would have been more intelligent instead of "beastly" would have been very interesting!