No - you're misinterpreting that. You say "When an improper batter becomes a runner or is put out, and the defensive team appeals to the umpire before the first pitch to the next batter of either team, or before any play or attempted play, the umpire shall (1) declare the proper batter out; and (2) nullify any advance or score made because of a ball batted by the improper batter or because of the improper batter's advance to first base on a hit, an error, a base on balls, a hit batter or otherwise.
The key word here is OTHERWISE. That covers a balk. R1 is out & R2 has to return to 1st."
Replace the word otherwise with the word balk then, if you think that is appropriate. Then the sentence becomes:
...nullify any advance... made because of ... the improper batter's advance to first base on a ... balk.
The batter did not advance to first base on a balk! He advanced on a walk. If the walk was the only reason R1 was moved to 2nd, you'd be right ... but it wasn't. The walk is nullified, thus leaving the balk as the proper reason to put the runner on 2nd. You guys are double-dipping here.
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