: Both were killed, but managed to take those who killed
: them down with them (the Balrog kills and is killed by
: Gandalf, and the Watcher, though petrified, kills all
: those who were sent to petrify/kill him. The 100
: 'zerks of course didn't have to worry about him
: personaly causing any trouble.)
Warning: If you have not yet read beyond the first book of the series, or only have seen the first movie (talking about LOTR now), *spoilers* ahead. Proceed at your own risk.
Gandalf was not killed by the Balrog. Injured, yes. Changed, yes. Lessened or diminished to any extent: not a shot. He actually came through the experience much more powerful than before-more powerful than Saruman, in fact. I believe that his horrifying battle with a creature of equal power helped him reach new levels of enlightenment. For thsoe who do not know, Gandalf is a wizard, and wizards are sort of like semi gods in physical forms. The Balrogs were essentially the same thing, merely dark and corrupted. Sauron was too...but his forging of the one ring gave him a considerable advantage over everything else. So to beat such a powerful entity, i believe Gandalf immersed himself totally in his powers, thus allowing him to become the changed person you see when he reappears in the Return Of The King.