Actually, it does not say you need your off-hand to be free. It just says you use it for balance, so if you are carrying a shield with it, you get the shield's armor check penalty as an attack roll penalty. Off-hand weapons are not as heavy or cumbersome, nor do they have armor check penalties, so if you use a weapon in your off-hand, you get no attack roll penalty beyond the normal two-weapon fighting penalties. And you may use Weapon Finesse with your off-hand weapon, too, if you have the feat for that weapon. This is clarified by the Sage in the official D&D FAQ, Main FAQ, page 19.
So, for example, if you have Weapon Finesse (short sword), you may use two short swords and use your Dex bonus to hit with both instead of your Str modifier.