Challenge and balance are not the same thing.
While you're right that they're not synonymous, challenge is a part of balance. Balancing a game also isn't just making sure everyone is on an even playing field. Specifically in an RPG it's making sure the player isn't being hit with ridiculous difficulty spikes or sections of the game that are incredibly too easy. For a co-op game it's also making sure everyone can play their build and feel like they contribute.
Balance NEVER hurts an RPG. There is always more choice than just 'remove what's strong'. Your example doesn't show balancing, it shows outright removal of a mechanic. Nerfing something or shifting its numerical values does not inherently change the identity of anything, for the second half of that. There are many ways to skin a cat, so to speak.
