Phronesis
Headphoneus Supremus
I agree with your sentiment - but not with your example.
I do agree that a lot of audiophiles have totally unreasonable expectations that balanced connections, or balanced circuitry, will improve the sound of their system.
However, I'm not convinced that many of them really believe it will "make their system sound more balanced" specifically because the description includes the word "balanced".
I suspect it has more to do with the idea that anything that improves the specs will produce an audible improvement.
I do, however, disagree with your example - MP3.
Yes, when you apply LOSSY MP3 compression to an audio file, you are losing information; there is no question about that; the purpose of MP3 encoding is to save space by discarding information.
(In contrast to LOSSLESS compression, where all of the original information is retained.)
Feel free to argue that you may not notice that information has been lost, and that you personally find that MP3 files sound just fine, but it would be inaccurate to neglect to describe MP3 as LOSSY compression.
It seems quite reasonable to me to expect a copy of an audio file to be complete, and to expect someone to specifically notify me when parts have been discarded, whether I notice the omission or not.
(Describing an MP3 file as having undergone LOSSY compression is not at all misleading - in fact it is rather the opposite - it is simply an accurate description of the process.)
IMO, both of you have valid points on "lossy". The term is technically appropriate, but it will also likely influence many listeners to perceive the sound to be worse (relative to lossless) than it actually is.