Will the resistor fail in this small circuit?
It's entirely possible that the resistor will fail when driven at 10 times its rated power. If it does, it will almost certainly do so by getting hot enough to pop the balloon. (This is called Letting The Magic Smoke Out. Did you know that every bit of electronics gear runs on magic? It's true. Each part contains a bit of Magic Smoke which makes it work. If you abuse the part it will go pop! and let the magic smoke out. Then the part doesn't work any more. Try it, you'll see. Logic is wonderful.)

In fact, I'd be tempted to use a 1/4 watt resistor instead of a 1/2 watt resistor because it will get hot faster and fail more quickly. Either way the balloon will pop more quickly.

In general, higher wattage resistors work on one of two principles, either they are physically bigger or they use a more robust material. If bigger, for the same power they spread it out over a larger volume and transfer it to the environment through a larger surface. From the same product line, a 1/4 watt and a 1/2 watt resistor will reach the same temperature at rated maximum.

Higher-wattage specialty resistors are typically a very high-temperature ceramic body with a resistive material which can handle higher temperatures without failing. I once had an array of 25-watt resistors which I was using as a dummy load in a test set, and forgot to turn on the cooling fan. The test auto-terminated when the solder connecting the wires to the resistors melted and the wire fell away and opened the circuit. Resoldering the wire and remembering to turn on the fan let me continue in very short order - the resistors were fine.