At first I wanted to call this concept, "The World's Cheapest Binary Warhead," but I thought in the wake of September 11, blah blah blah. The idea's pretty simple: You can put one balloon inside another and, given two chemicals that do something interesting when you mix them, you can fill the inner balloon with chemical A and, once it's tied off, fill the outer baloon with chemical B. Then, when you throw the thing, both balloons will break, the chemicals will mix, and some interesting reaction will occur.
My first thought was to cut open a bunch of glo-sticks and separate the stuff in the glass inner vial from the stuff in the plastic outer vial. Then I'd load the stuff from the inner vials into one balloon, the stuff from the outer vials into another (perhaps after diluting them a bit), and--voila!--a water balloon that makes a big chemilluminescent SPLAT when it hits. It still seems like an interesting idea, but it also seems like a lot of trouble and expense to go to for a quirky gag. If anybody out there decides to try it, I would love to hear about it and/or see pictures.
My next thought was that one could make some sort of nasty incendiary gizmo with the idea. You know, sort of like a molotov cocktail: Potassium chlorate/sugar solution in one balloon, dilute sulfuric acid in the other. (I'm actually not sure if this will work with wet potassium chlorate/sugar. Please, nobody try it.) Once I'd made a couple of these with just water, however, I realized that A) loading the two components without accidentally mixing small amounts is doable, but it's not something I'd care to risk if their reaction was really dangerous and B) I'd want something more substantial than the skin of a balloon standing between me and a flaming ball of death in my hand. So, apart from the fact that making incendiary devices is generally bad, making one out of nested liquid-filled balloons would be really stupid. Also, C) the kinds of organic liquids (gas, toluene, kerosene, etc.) that tend to make good fuels will eat through a rubber balloon really fast. Some kind of alcohol might work, however. Anyway, don't do it. See (A) and (B), above.
Probably the best two-component mixture I've thought of is household ammonia and diluted pool acid. If you don't make either solution very strong, the simple acid-base reaction between hydrogen chloride (pool acid) and ammonium hydroxide (ammonia) will yield a nice cloud of harmless ammonium chloride smoke (and some extra water). I haven't tried this one, either, but I intend to sometime and will update this page with pictures of the results when I do.
Actually making the balloons is pretty easy. You need two balloons, one of which should be smaller than the other (otherwise the inner balloon ends up way underinflated and sometimes won't break when it hits). I've used 7" and 9" party balloons successfully. You take the smaller balloon and wrap it over the eraser end of a pencil, sort of like putting on a condom. (Sorry, kids.) Then you wrap the outer balloon over the pencil/inner balloon unit, and withdraw the pencil. Now you've got two deflated balloons, one inside the other.
Now you fill the inner ballon from your tap, or whatever. The outer balloon will expand around it. When you're done, tie off the inner balloon and let it fall into the outer balloon. Then fill the outer balloon and tie it off, and you're done. Throw (or better yet, launch from a water balloon slingshot) at something safe and friendly and have fun.