the definative balrog answer :)

[Gordis]

I shall give you a good advice, Valarauko. Forget all encyclopedia - use LOTR text to draw conclusions.

And in the text there is Gandalf's account of the fight in the abyss and later upon Zirakzigil:

'Deep is , and none has measured it,' said Gimli.

'Yet [the abyss] has a bottom, beyond light and knowledge,' said Gandalf. 'Thither I came at last, to the uttermost foundations of stone. He was with me still. His fire was quenched, but now he was a thing of slime, stronger than a strangling snake.
'We fought far under the living earth, where time is not counted. Ever he clutched me, and ever I hewed him, till at last he fled into dark tunnels. [...]
'There upon Celebdil was a lonely window in the snow, and before it lay a narrow space, a dizzy eyrie above the mists of the world. The sun shone fiercely there, but all below was wrapped in cloud. Out he sprang, and even as I came behind, he burst into new flame.

It sounds very much like shape-shifting to me. A thing of fire and shadow became a thing of slime (to adjust to the surroundings), and then turned back again into the thing of fire.