If a miner submits a pruning block with modified balances, they will be rejected by the rest of the mining community as an invalid block because the submitted balances do not match what they have, and so it will never make it into the actual blockchain to stay. Thus, similar to accepting payments you should not accept a parsing block until it is 6 or more transactions old (and more is probably preferable) if you are downloading from scratch.
Confirmations you mean, right? So in this case 6 blocks deep. So what if the miner produces a pruning block for me nodes that has a higher block height than the actual? Then the miner expands on that block? Currently the best blockchain is chosen by having the greatest sum of difficulty, but this breaks that because it cannot be calculated with a partial blockchain. How would the node be able to know that the blockcthat it knows of is incorrect? If it receives the actual blockchain how will it know that is the correct one versus the incorrect one given by a malicious node/miner?
Yes, the pruning block would essentially include a copy of all UTXOs as of the previous block. However, any pruning block submitted with extra, incorrect, or missing UTXO's should automatically be rejected as an invalid pruning block, so it would not give miners the ability to spend other people's bitcoin (again those would be rejected by other miners).
So then what would happen to the original UTXO that is replaced/removed by the pruning block. What if someone wanted to spend from that? Someone who has synced the bickering and then took it offline prior to the pruning block being mined?
I surely hope technology keeps up. However, if the
Blockchain Size continues doubling every year as it has been, it will quickly catch up to Moore's law as that only doubles every 2 years. Hopefully the economy reaches user-saturation before then at which point blockchain growth will be linear, but if not as you say the block-size limit prevents this from becoming an issue. The main problem there is that exponentially more people each year will be unable to perform transactions, which is bad for the currency.
The blockchain cannot grow exponentially forever because the block size limit forces a maximum growth rate. It can only grow at 144 Mb per day right now.