I was at the match, about 50 feet away from the Mancini/Balo "conversation."
Mario may have thought he was offside, but I don't think many in the stadium did -- I didn't even think about that being a potential excuse until I got home and read this thread.
Balotelli was booed at introductions and got a lot of stick from the LAG supporters, so maybe he was trying to show them up.
I don't think Mancini considered this particular match just another pre-season warm-up, not with several starters playing 90 mins -- I think this meant more; he wanted the heat turned up. City played much farther forward in the first half than usual, I think.
I want Balo to be the talent he's supposed to be, and City need him. Overly childish on Balo's part; a bit overdramatic on Mancini's part but the right thing to do.