Bad Dawg, you can't not tell us the rest of that story!
It's not that exciting. You see, there are many, many, many Filipinos here in Hawaii and I had the good fortune to be the boss of a group of them. And, being culturally and cuisine-adventurous, and being polite (that is, not rejecting out-of-hand something I haven't tried that isn't obviously a health hazard or death-accelerator) I sat down with several of these fine, salt-of-the-earth types to try the Balut.
First off, it looks just as bad as you imagine. The kicker, though, is that there are those who let the thing develop a whole lot further - til it's got feathers and a beak - and then cook it and eat it. Thankfully, the balut I ate was generally a well along egg but still more egg that anything else. It did have substance, structure and texture that was obviously and alarmingly not egg-like.
So you carefully crack open the top, throw in a little salt and vinegar or hot sauce, and drink the liquid from the egg. Then you suck out the, um, contents of the egg and eat them in one bite or so.
Given the right social situation, I would eat them again but I wouldn't seek them out for the flavor. This is clearly a drinking man's food and I was at work when I ate them, so pre- or post-eating palate cleansing and more's the pity, too.