live rock does have the exact same fuction as bio balls and the exact same negative efffects. the problem with bio-balls is that they trap detritus and the flow cannot blow it away to be cleaned by your skimmer, ect. live rock will do the exact same thing. i have seen a few other people suggest doing that also, but in reality, it doesnt fix the problem at all. it only makes the set up more expensive. haha.
and you would be removeing the bacteria when you replave bioballs or clean them. but in an established tank, it will quickly grow back
even with the negative effects, bio balls can still be very beneficial to FO or softie tanks, but i dont knwo if i woudl recomend them for an sps tank.