Hot air balloons were used for reconnaissance, little more, and weren’t very effective because they were at the mercy of the winds. This discovery (even if it had been within the capabilities of the CSA, or some part of it likely) sounds like literal pie in the sky, a lost-causer dream. The response to the Merrimac was the Monitor, and the response to these things would have been the first anti-aircraft guns. :’)
I always thought it was a grave tactical error not to pursue sinking the blockading ships in spite of the presence of the Monitor, putting that mission first and foremost, forcing the Monitor to come to those ships' defence.
The Virginia had enough guns to engage both a blockading ship and the Monitor at the same time.