I'm not sure Balon's decision was all that stupid. Putting aside the fact that the military aspect of his plan was much more easily achieved than what Robb wanted him to do, Robb's alliance scenario depended on the Lannisters (or whichever southern contender eventually triumphed) accepting the loss of the North, the riverlands, the Iron Islands, and at least part of the Westerlands. Balon's plan, on the other hand, involves the Seven Kingdoms losing "only" the Islands and the North. Still a bitter pill, but overall an easier one to swallow. Tyrion is at least not immediately opposed when he receives the offer (which, by the way, initially comes before the Battle of the Blackwater, not after). And later, Tywin's response to it is not rejection but to wait and see, because he has the Red Wedding in the planning stages. Balon's plan ultimately failed more because of that unlikely development, and because of later action by Theon (whose insistence on holding Winterfell and "killing" Bran and Rickon turned the North violently and permanently against the ironborn) and Euron (whose murder of Balon and claiming of the throne required Asha and Victarion to withdraw their occupying forces and attend the kingsmoot), than because it was flawed in conception.