I think this is fairly straightforward - Edit 1
Before modification by Light in the Night at 24/09/2010 09:00:32 AM
Here is Moiraine's explanation of how balefire works, (and RJ confirms with his interview answers), from TFoH chapter 6:
"When anything is destroyed with balefire, it ceases to exist before the moment of its destruction, like a thread that burns away from where the flame touched it. The greater the power of the balefire, the further back in time it ceases to exist." (emphasis mine)
Notice that it specifically states "anything", not "anyone".
Ergo, the massive amount of balefire channeled through the CK at Graendal's Palace would mean that the palace, (and anyone inside it), ceased to exist before the balefire touched it.
"When anything is destroyed with balefire, it ceases to exist before the moment of its destruction, like a thread that burns away from where the flame touched it. The greater the power of the balefire, the further back in time it ceases to exist." (emphasis mine)
Notice that it specifically states "anything", not "anyone".
Ergo, the massive amount of balefire channeled through the CK at Graendal's Palace would mean that the palace, (and anyone inside it), ceased to exist before the balefire touched it.