How can we balance one-half of an oxygen molecule, or any other diatomic, in a chemical reaction?
Whenever a chemical reaction is written with fractional coefficients, implicitly it's meant to be interpreted as the amount of substance in moles of each species that is involved.  So, it's not really one half of an oxygen molecule reacting, but 0.5 moles of $\ce{O2}$ reacting.

bon's comment is spot-on -- if you are trying to think about a reaction written this way on a molecular level, you need to multiply the reaction through by whatever constant eliminates all the fractions.