When balloons attach to the player, they have a gap between them and the player.

Probably it's not a Mekanism issue, rather a vanilla bug. It's because the players have their "collision" box 2 blocks positioned at the eye height (1.625).

Fixed!

Thank you, but I think you fixed it a bit "too much". The balloon was lowered so much that it attaches at the player's eyes pos, hindering the view. :)

EDIT: Also, balloons barely lift players from the floor. Intended?

Do you know if this has always happened by any chance, or rather if it is a recent issue?

Sorry I can't tell. Probably it has always been this way since when dispensers could trap players with balloons (this is how I did to take that screenshot).

EDIT:

Added a new screenshot: