Dragons vs. Balrogs?

[Feanor...]

I think that Morgoth's spirit became caged in his body because of his desire to be a visible tyrant on the earth. As powerful as the Balrogs were, Morgoth was a much greater being and if he gradually became ensnared in his form, I think it likely that the lesser Balrogs were similarly trapped.

I would have to disagree with this statement.

Now Melkor came to Avathar and sought her out; and he put on again the form he had worn as the tyrant of Utumno: a dark lord, tall and terrible.

As you can see here the form Melkor had put on was the same as the one he had put on before and there was nothing to prevent him from taking it off again besides a vague "In that form he remained ever after". Refering back to the string about spiritual encounters Melkor's clash with the Ungouilant would definitely have been spiritual and considering the fact that she had just consumed the power of the Trees and Wells and gems of Fëanor the encounter was spiritually devastating for Melkor and he was wounded deeply, preventing him from changing form as easilly as before. As for Sauron his downfall was not as spiritually severe for in the downfall of Numenor the damage was mostly physical and he yet retained most of his native power the only spiritual damage done was due to the to the involvement of Illuvatar's power, yet that was not focused directly on Sauron but on the world and namely Valinor and Numenor; thus indirectly at Sauron, which is why he sustained less injury and retained more of his power.