Yes, she could smoke on the balcony, there are any rules to prevent this, but if there are others sitting on their balconies, who have specifically requested a non smoking room, she might want to refrain. Being allergic to smoke, I know that it would irritate me to no end to be on my balcony, in a non smoking section and have someone else out there smoking. But, as long as it is in a smoking optional area, then smoking on the balcony would definitely be no problem at all, as most people staying their either smoke, or live with those that do.
As for how smoky a smoking area in a hotel would be, just think of it like this... how many smokers use that room on a daily basis, and how effective are air fresheners? If you don't usually live with a smoker, then, yes, you will definitely notice.
