All events that could have been said to have “happened” before the destruction of an individual’s thread are remembered by any other individual, though the physical reality of the situation is now changed; anyone that was witness or party to the “reversal” of time will still remember all the events that were undone as if they had actually happened even if the effects themselves no longer exist.
Balefire can even bring people back from the dead, or rather, prevent them from dying in the first place; Aviendha, Asmodean and Matrim Cauthon were brought back to life when Rahvin was hit by balefire with enough force to undo the attack that caused their deaths. In another instance, Mat was saved when the Darkhounds that attacked him were burned away to the point before injuring him.
The Dark One is unable to resurrect any person who is killed by balefire, mentioning himself that he is not capable of “stepping outside of Time.” As balefire technically causes a person to die in the past, it is assumed that the Dark One can only resurrect someone within a certain time-span, with balefire exceeding that limit. Another possibility is that due to the nature of the wheel, when a person dies, their thread does not end, but is simply set aside until it is used again/reincarnated as another person. Balefire burns the thread meaning that the thread can no longer be used in the Pattern’s weave.