There's no simple answer to this question. Humans have been breeding deformed animals to better fit certain tasks for thousands of years. Most dog breeds are more or less deformed relative to wolves, though arguably only certain breeds are definitely disabled in some way. I'm thinking of things like breeds with floppy ears (which reduce their hearing) and breeds where people dock the tails after birth (which reduce their ability to communicate with one another). Horses and cats have been somewhat less changed over the years and are usually able to live in the wild perfectly well; dogs generally cannot.
Anyway, what you're asking is whether deliberately deforming an animal is justified by increasing its value to us. For the species the answer is definitely yes: animals that have been domesticated and turned into something useful (e.g. jungle fowl -> chickens; boar -> pigs; and aurochs -> cattle) have all done much much better in terms of numbers than their wild relatives. So mollies as a species do well from us, just.
The debate really centres on the individual. A balloon molly is handicapped. It cannot swim or change position easily, and things requiring these behaviours are inhibited. Males cannot chase and fight easily, females cannot swim away from males easily, they cannot feed or explore as easily. In short, it would like you going through like with your feet bound together so you could only hop or shuffle. We cannot know whether they are "frustrated" psychologically -- our understanding of how fish think is just too limited at the moment.
Personally, while I have nothing against fish with brighter colours relative to their wild cousins, I don't like fish with changes that go beyond that -- such as balloon mollies, veil-tail danios and angels, and so on. The Siamese fighter is perhaps the classic example: its fins are so long it cannot swim properly, so finds it difficult to survive in a community tank. The males are condemned to life in "betta jars" without any kind of interesting habitat to explore or conspecifics to interact with.
Extremely inbred fish are also less healthy. They are more prone to disease, tend not to grow so big or so quickly, and often produce smaller broods with a higher proportion of deformed fry.
Cheers,
Neale
I love balloon mollies! However, I read in a book that "they are no improvement to science." So my question is how do/did they breed mollies to become so balloony? Do they really have problems and is it really hard on a molly to be a balloon molly? Mine swim awkwardly, but I think it's cute. Maybe I have a sick definition of cuteness. I'm curious what you guys think.