Let's say a hero is defeated mid way in a campaign, we remove him from the current mission.

When he comes back i presume he start with the basic equipment ect.

Does it still provide a balanced game for the other heroes pursuing the campaign?

I don't think he/she would lose any equipment. Certainly doesn't say anything to that matter in RRG from what I can tell.

When a Hero is first defeated (during a mission) he becames "wounded".

When a wounded Hero is defeated again (during a mission) he is forced to withdraw.

Looking at the Withdraw rules (page 25):

- The abilities on the hero’s sheet, Class cards, and Item cards cannot be used for the remainder of the mission.
- The player controlling the hero can still help the Rebel players make any group decisions as needed.
- If a hero has an Ally’s Deployment card in the mission, he may choose to give it to the player whose hero has withdrawn.
- Withdrawn heroes still receive all hero rewards at the end of the mission. If a hero withdraws during the final mission, he still wins or loses the campaign with the rest of the Rebel players.
- A hero who has withdrawn remains wounded until the end of the mission.
- During post-mission cleanup, withdrawn heroes are no longer considered withdrawn. They perform all normal “Post-Mission Cleanup” steps and participate in all future stages of the campaign.

The equipment remains.

Thank you for the clarification