To use any of the WiX extensions you need to do two things.
1) Add the schema statement as you originally had.

<Wix xmlns="http://schemas.microsoft.com/wix/2006/wi";
xmlns:util="http://schemas.microsoft.com/wix/UtilExtension";  
      xmlns:netfx="http://schemas.microsoft.com/wix/NetFxExtension";
xmlns:bal="http://schemas.microsoft.com/wix/WixBalExtension"; >

The above three UtilExtension, NetFxExtension, and WixBalExtension are all
correct and necessary, but not enough.  If you then add any code to your
project related to these three extensions like:
<BootstrapperApplicationRef Id="ManagedBootstrapperApplicationHost"> ...
You will get the errors which you observed.  

2)  You also need to 'Add a Reference' to your Project file.
For me on VS2010 (and I think it is similar on 2012) look at you Solution
tree.  There is a virtual folder named "Reference".  Right-Click and select
Add. You will get a dialog that has tabs Project, Browse, and Recent (at
least on 2VS2010).  In Browse point at you Wix installation folder,
typically C:\Program Files (x86)\WiX Toolset v3.8\bin and select the DLL
which is named and related to the Wix extension that you are trying to use,
in this case WixBalExtension.dll.  If you are also trying to use the
UtilExtension or the NetFxExtension, you need to repeat this process for
each DLL.  (If you ever move the Wix Toolset to a different path, like E:\
then you will need to go to each project and fix these references.)

If you still have problems you can enable more verbose build logs in VS
Tools\Options\Projects and Solutions\Build and Run.

Actual relevant sections of code (and if necessary a detailed build log)
will clarify what the problem is.   



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