Hi Kevin,
When I balance my outfits, I am trying to equalize the mass of the rod above its center of rotation with the mass below its center of rotation.
The diagram below is my attempt to explain the concept. I used images of weights hanging off the rod to emphasize the idea that the rod is a balance beam on top of a fulcrum.
The mass of the blank (above the center of rotation), guides, wraps, fly line, coatings, etc needs to offset the mass of the blank (below the center of rotation), handle, reel seat, reel, backing, remaining fly line on reel, etc. Due to distances away from the center of rotation, small mass near the top of the rod can offset or balance a much larger mass below the center of rotation.
Due to the location of the fighting butt, it has a huge influence on the balance of the overall system. As its mass and distance from the center of rotation increase, the mass of the reel must decrease to maintain the overall balance of the outfit. For the same reason, the same reel is unlikely to balance an up-locking reel seat versus a similar rod with a down-locking real seat (if all else is equal).
Does this make sense? Let me know if I should try to explain this concept in a different way.