Aye, for the fact of not facing previous losses of might, the Balrog is the most powerful Maia in the Third Age. By the sheer measure of his own prowess, at least. Sauron has lost considerable amount of his magic, but he's indeed the mightiest threat in Middle-earth, due to him ruling massive armies, the foulest kind of creatures and a realm in general. I think that Gandalf was referring to this not so meaningless aspect. I don't believe he was picturing in his mind a direct confrontation with him, whose result would have been determined by sheer force. Confrontation that seriously risked to take place, when Gandalf visited Dol Guldur for the first time. Sauron, whom some deem pretty much invincible even with halved capabilities, was forced into flight by the sole perceiving of the wizard's arrival. And he was Gandalf the Grey. Leaving differences aside, all Maiar belong to the same order of Ainur and boast an akin level of might. And I'm not saying that one could not tower over another one, but the idea of the One Ring (an artefact of the Second Age) enhancing the majesty of a Maia in perfect state sounds quite absurd. Not that a Maia would not wish to seize the One Ring for himself, but there's not even the need for this to be. Like Eönwë wielding the One; which boost would you entail in this situation?
Ungoliant was a Maia. And the radiance of the Two Trees was renowned to be the grandest of the Valar's deeds, even greater than the ancestral Two Lamps. I don't think we can draw a comparison between the One and the Two Trees, as they encompass totally different themes and features. Together with the reference that it was made in regards of the Arkenstone: is the King's Jewel the material embodiment of a Maia's essence? Does it emanate evil influence? Does it grant magical power? By the way, Sauron's longing for his Ring and the menace which the situation poses are motives intertwined deeply with the Third Age, being LOTR immersed into the War of Wrath. An age in which the Balrog is completely something going beyond schemes. An age to which he does not belong much, unlike Smaug. Therefore, it's not three ages versus a sole one, in my opinion. And, with the utmost respect for Durin's Bane, hiding for millennia in forsaken caverns and lurking silently (more or less) in the creeping shadows of Moria doesn't seem to be very dynamic; I think that guarding the mines is more proper for his characterisation, in the context of the late Third Age (going back to the Elder Days is not of much avail, as that era ended for the good after the War of Wrath and the sinking of Númenor). Whereas Smaug appears more active, given his plan to take control of an entire kingdom on his own, coming from unknown territories of the North. As I said, he's much more in tune with the geopolitics of Middle-earth at that time, as Gandalf exactly feared.
I also fancy a lot the underlying motive of greed which Julio, Elf and Ody talked about. It surely tells something more; useful hints. And gold itself is, as a theme, profoundly connected with greed, in most of the literature that deals with desire and the yearning of things. An ever-green theme in mankind's knowledge. And, as a not appalling coincidence, the One Ring is made of gold. Purely and simply made of gold, without other ornaments. Without gems and jewels, contrary to the other Rings, to symbolise greed, desire and obsession. I guess its very shape, particular and apparently simple, was not without a certain meaning.
1. Walkure I was referring to the match between Gandalf the White and Sauron at Amon Hen, what you site is of the battle with the White Council and many were present there as told in the Hobbit. Also, when Sauron forged the Ring he was at full power (from his First Age incarnation). Also Eonwe wielded the Silmaril's (two of them) without any problem. To suggest that he would take the ring is folly and something he would not do, oh and he is more powerful than the Balrog by far. Why would a boost even apply to him given that he wouldn't even take it for himself?
Point 2: 1. I was drawing comparison between Silmarils and the One, not the Two Trees. Silmarils that were made by Feanor and his gems boosted Ungoliant. Just saying he wasn't near eithers level.
2. Durin's Bane was trapped, yes he hid after WoW but he was trapped later on, that is why he acted up after his release.
Point 3: I'll just quote something for all you awesome loreists out there since THIS IS CANONICAL:
"For five hundred years, Moria was left to the Balrog. Sauron began to put his plans for war into effect around the year 2480 of the Third Age. As part of these, he sent Orcs and Trolls to the Misty Mountains to bar all of the passes. Some of these creatures came to Moria. It is unclear whether Sauron could have controlled the Balrog (they were both Maiar) but it is probable that they would have been allied against the "common good". The Balrog did allow the Orcs and trolls to remain in Moria while it dwelt there. We do not know whether Sauron was aware of the Balrog's presence prior to this time."
Just a little something from Tolkien Gateway, access to Sauron's troops seem to be a bigger indicator than just mere greed, if going by speculations.
Walkure, I am not upset by ET choice, I have stated and written over and over again that I am OKAY WITH ET CHOICE OF SMAUG but it should be canonically implemented via Isildur's ideas. HOW HARD WAS THAT TO FOLLOW?
The Balrog would be a more canonical choice, but that is BESIDES THE POINT SMAUG IS ALREADY PICKED. So if all of you are trying to convince me otherwise, there have been no good examples, just opinions--the Balrog IS A BETTER CHOICE THAN SMAUG, but SMAUG IS ALREADY PICKED. So I want a canonical solution.