: 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.
Yes, he did return changed and more powerful. But yes, he DID die. He says that he "passed through fire and death", and Tolkien himself explicitly state in a few letters that Gandalf's body was destroyed: he died.
Of course, being killed means that your soul lives on. For ainur this normally means that they rebuild their strength in order to create a new physical form, as Sauron, f'rinstance, does. Istari (Wizards), however, are different. They were actually incarnated into proper bodies, not merely the equivalent of "clothes", so as to better be able to fulfil their role of guiding the Children of Iluvatar. This unfortunately allowed them to also "age", albeit extremely slowly, get tired (Gandalf), and become corrupted by material desires (Saruman).
It also meant that when they died, that was it for physical form. It was only by the grace of Eru, winesing Gandalf's selfless sacrifice, that he was granted another body by Eru himself, as stated by Tolkien.