I have (seen this)
I don't think that's necessarily a problem with the dispenser, I think it's a problem with the user. I'm sure it's possible to inhale the balloon and die, too, but it seems like it would take some stupidity to accomplish, so I wouldn't count it against the balloon.
Even if I used balloons, I would still use my dispenser to fill them. I'd probably use something like a mylar bag though instead of a balloon if I were going to do that.
Has anyone tried to plug nitrous?
(couldn't resist)