Could he have used that kind of firepower earlier to the Fellowship's benefit?
One of Tolkien's themes is the appropriate use of power, and in his universe, power comes from your inner nature. You cannot—or should not—obtain more power through any artificial system, because that just distorts your nature.
For example, we have Aragorn who usually prevails just by showing up and being all Aragorny. He doesn't make speeches, he just exudes this natural authority (or even semi-supernatural powers) that make people want to follow him. This is nobility, in Tolkien's view—some people are just born better. Others, like lesser men and Hobbits, have a lower status, but can play their roles with equal faithfulness to this principle.
So, what about Gandalf's power? If you read the supporting materials, you learn that he is really an angelic being clothed as a mortal. The Balrog is a being of the same order. So, in Tolkien's morality, Gandalf can reveal all of his power when in battle with an equal—the Balrog, or Saruman. In fact, when Gandalf gets his promotion to being the White, he has the natural authority to even cancel Saruman's power.
It would be immoral for Gandalf to use his power directly against lesser beings, even when that would do good. Instead, he must use his power more indirectly, to convince the people of Middle-Earth to unite.
Saruman is depicted as having succumbed to this temptation. Frustrated with the disunity among the peoples of Middle-Earth, he decided to create an artificial system that would be strong enough to defeat Sauron, namely his industrial revolution around Orthanc, yielding the abomination of the Uruk-Hai. And as he became interested in power for its own sake, he became a tool of Sauron.
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The Balrog was a powerful magical creature and was a "foe beyond any of [them]". In this situation Gandalf had to turn his dials up as it was the only option.
His mission was to inspire and assist, he was not permitted to take over and fight everyone's battles for them.
Gandalf is both meddeling and hands-off, this is part of what makes him an interesting character.
For instance, for as powerful as he is, don't you think he could have devised a better way to get to Mt. Doom rather than just walking/horse back? Sure, but the journey wasn't up for him to decide, it was for the rest of Middle Earth.
The Balrog, if you look into Middle Earth's back history, is actually more related to Gandalf than the rest of the beings on Middle Earth, both having been angelic beings at one point. Since this balrog was going to interrupt the happenings of Middle Earth Gandalf had to seriously intervene.
Gandalf has always been powerful, but he only expresses that power when absolutely necessary.