Actually it IS for balance. The idea of it is that you place the hole at a point where you want to start the wheel, i.e. where it is conventient to start the treadle. The hole makes the bottom of the wheel heavier, so no matter when you stop treadling the wheel stops where the hole is at the top. Makes sense?
The trouble is with my wheel, I didn't make the hole big enough, so it doesn't work. And I used pine, maybe a heavier wood would work better. I have to use my hand to position the wheel correctly before treadling. But at least the hole let's me know where to position the wheel. Also a lot of commercially made wheels will use weights at the bottom of the wheel that help it to stop with the hole at the top.
Hope that helps.
Things I have crocheted for charity.