Hi There,
I too was having this issue. On the backend preiview, balloon errors where working as expected, however on the front end, nothing! The captcha would refresh and that was all.
It occurred to me that the backend was running in an iframe, so I set the form from the back end param to run in an iframe... and presto, they work.
Obviously, this is not what I would call a perfect solution, but it works for now.
If anyone has a proper solution

to make them run without the iframe, that would be great.
The only thing that has even popped into my head was jquery.. I am VERY new to BF and have not investigated but I have seen the word turn up in a few forum post.. If it where not being loaded correctly, there could be conflicts, that in an iframe where overcome.. I will see what I find when I have time and report back here.