I would argue that neither group is particularly well balanced. It's only balanced because the DM massages the system so that challenges match up - either bumping up the difficulty by using nastier monsters, or using weaker monsters. Thus we achieve Raven Crowkings "Balance in Play" model. In the end, the game leaves it up to the DM to achieve balance, thus, I would argue, that balance is not a design goal of the game.
No, no, no, no.
That is a misreading of what I am saying.
In 1e, it is explicitly up to the players to seek the level of challenge they are comfortable with -- and, if they are successful, reap the rewards thereof.
In the Gygaxian model if a group of 5th level characters has a vorpal sword, it is because they earned it. If a group of 10th level characters has little more than a +1 spoon, it is because they did not. Both groups might be active within the same campaign milieu, playing under the same GM. They may have had the same opportunities. They might mix-n-match in some game sessions. In fact, in the Gygaxian model, it is likely that their careers will intersect from time to time.
The GM does not, and should not, "bump" challenges up or down, or perform any changes
in situ to make things easier, harder, more rewarding, or less rewarding for the players. The only admonishment Gygax makes in this regard is that the GM consider what the players are attempting, and how well they going about it, when making various die rolls. Moving quietly and quickly toward your objective, therefore, should result in fewer wandering monsters (as a specific example from the DMG 1e). Likewise, combats and loud arguing can and should call for an extra roll to see if wandering monsters come to investigate.
It is not incumbent upon the GM to balance character against character, characters against encounter, etc., etc., except in broad terms over the course of the entire campaign. Thus, the GM balances the total sum of opportunities, and balances how the rules are applied. No other balance is needed, and (in Gygaxian D&D) no other balance is desireable.
I will certainly agree that even 1e was not always played in the Gygaxian mode....the advent and sale of modules, tournaments, etc., prevented this to some degree. DragonLance was about as anti-Gygaxian as one can get within the 1e framework.
But it is the Gygaxian model that 1e is balanced for, and for that model it is balanced well.
RC