I love PC plan-making. One of my favourite parts as a GM - to sit back, and watch my group make battle plans. So, I'll cut in with some information:
1) The house is probably not big enough to have huge hallways - if there was a fight indoors, you think they could only come at you one, or at more two, at a time.
2) The streets are not always crowded, but they're crowded enough that a fight would draw notice. God knows how fast the guard is in responding to threats.
3) Climbing to the balcony is fairly easy - there are ledges from the nearby window to climb, as well as a fair bit of ivy that has crawled up one of the support beams. In game terms, it'd be a DC 12 climb check to get there - and unless you fail to hit DC 3, there's no penalty for falling (if you do fail, it's 1d6 nonlethal damage - at worst, you're falling a little more than ten feet, feet first).
4) Pendrake notices that the bars on those ground-floor windows are strong, but not THAT strong. They're made of iron, and iron can bend fairly easily if one is strong enough. Of course, they're all in open view.
5) The guards don't often come within view of one another, so picking 'em off one at a time is an option.