balanced or not?

[delericho]

Gnomes and halflings below elves? Seriously?

Yes. Gnomes and Halflings are almost completely useless in any damage-inflicting class (could probably make a good Halfling Ranger, I guess. Shame the sling is such a poor weapon, or that would be a really interesting choice), due to the combination of a Str penalty and having to use Small weapons. They wouldn't suck as Rogues, except that the movement penalty really kills manoeuverability, which is vital for the class. They would make decent Bards or Sorcerers, but they're pretty much the weakest of the core classes.

Admittedly, they make for good Clerics, Druids and Wizards... but see below.

elves... lose a TON due to having a penalty to the most important stat.

(I hope you'll forgive me for some very selective editing. You didn't quite say this, but were very close.)

In my experience, the Con penalty doesn't mean that much. Invariably, the player will 'mask' it by either assigning a higher rolled stat to Con, or will drop more points into it than a comparable Human character. Since almost all classes have one or two 'dump' stats, this amounts to those stats being lower than they otherwise would have been. But then, the reason they're called 'dump' stats is that below a certain point there is no loss.

I see a lot of stupid and ugly Elven Fighters, and weak unlikeable Elven Rogues, but I have never seen an Elf with a Con below 10.

Str is virtually useless for most powerful characters, so it's not much of an issue. Same with weapon damage... a penalty to one of the worst (Str)

This is a new one on me. My players certainly disagree. Unless there's a lot in the supplemental material to make Str obselete (possible), or one is using a really generous attribute generation method, then the optimum build for a Fighter, Paladin or Barbarian appears to be maxed strength, the heaviest armour possible, and a two-handed weapon. Add an Animated Shield as soon as possible.

Of course, those classes alone are hardly the barometer of 'powerful characters'. Again, though, see below.

I'm with MoogleEmpMog regarding Gnomes & Halflings. Both make excellent Wizards, Druids or Clerics (though Gnomes are slightly better as Wizards, if they don't specialize and bar themselves from using Illusion spells).

Okay, but may I submit that that has more to do with the power of the class than the relative merits of the race? Certainly, Clerics and (especially) Druids are the most powerful of the core classes; it's hard to find a race that doesn't make an excellent member of these classes.