Balor, definately.
Balor managed to all but destroy civilization on the continent. Granted, it took him a good deal longer than it took Soulblighter to take over a bunch of cities, but that's because soullblighter had myrkridia on his side, along with mauls and myrkridian giants. Just think what Balor could've done if he'd had those guys.
Also, Balor always outranked soulblighter, whether as the leader of the Fallen Lords or as Connacht, when Soulblighter was Damas, one of Connacht's leiutenants. He even managed to bind the Fallen's powers to himself, thus making sure nobody backstabbed him. Soulblighter, however, didn't have the power Balor had. Although he ressurects Shiver and makes her loyal to him, her power isn't bound to him; she simply likes killing people, and she might as well do it with the help of an old friend.
Third, look at their attacks: Soulblighter merely has a scythe that takes out one person at a time; Balor has a sword that sends out huge bolts of lightning. That is arguably the best attack in either game. The only attacks that could possibly compare are Alric's dispersal dream and Balmung sword.
As for the light side, I'd have to say Myth II's is more powerful. Most of the nine seemed to have been somewhat useless, as they never seem to accomplish anything. The biggest exceptions to this are Alric, obviously, and whichever avatara defeated Shiver at Myrgard (I'm too lazy to check up on that right now).
Also, M2's light side has trow, The Deceiver (a VERY powerful guy), warlocks, dwarven mortars, heron guards, etc. which TFL didn't have. The archers are better as well, with noticably better aim, and also have fire arrows. The only real unit missing from M2 is the forest giant, which is equivelent to the trow.
The only big advantage TFL's army had was experience. They had been fighting for at least seventeen years (as evidenced by the narrator, who joined after the Fallen appeared), while in M2 the narrator states in the log for Gate of Storms "It seems that too many years of peace have softened the once legendary armies of the West." However, the new units more than counter this disadvantage.
