I then started thinking of what an adorably stereotypical romance story it would be, for the dashing pirate to swoop in and romance the cute girl who grew up on the streets. Then there was the handkerchief scene, and her shyness when approaching him, and the way he promises to keep it "close to his heart". I got the feeling she had been holding onto that handkerchief rather tightly, just so she could return it to him (and this setup is used rather often in shoujo romance stories).
I feel like Balthier could very easily seduce Penelo. He's very classy, refined, charming, etc. To her, he represents a mature man who is very different from Vaan, whom she's used to. Balthier is something different. And for his part, I think Balthier could fall for her if he got to know her. She's sweet and innocent, something he's probably not very used to (at least, not used to being around that sort of person for very long...). It's a classic story really, of the rogue-ish playboy finally falling for the innocent girl who loves him. XD