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I have seen fans like these for use in ballooning and glider propulsion.

Does adding one of these change the definition of the flight vehicle? e.g. is it No longer a balloon, but now an aircraft? Does only the flight elevation and proximity to a controlled airspace matter — or does the capacity of the craft have an impact?

I suppose another dimension of this question regards if licensure changes in such case.

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Yes, a hot air balloon would change class, if you are adding an engine and propeller to provide thrust. With powered flight comes the need to provide some form of flight control; at this point, you have an airship, albeit a thermal airship.

According to the FAA's Airship Design Criteria, and much like @voretaq7's citation in another answer:

An airship is an engine-driven, lighter-than-air aircraft, that can be steered.

The FAA has a whole section on Airships, for further reading.

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    $\begingroup$ So, does the class legally or only practically change? It's legal to hold a PPL for gliders and fly a powered glider with no additional training. A powered glider is not "Airplane Single Engine Land" simply because it has an engine. It's still a glider and requires no medical or additional training. What is the mechanism that formally and automatically converts a baloon to an airship by simply adding a fan? $\endgroup$
    – acpilot
    May 25, 2016 at 20:57
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Well, a balloon already is an aircraft, specifically:

A balloon is a lighter-than-air aircraft that is not engine driven, and that sustains flight through the use of either gas buoyancy or an airborne heater.

So if you were to attach engine-driven propellers to your balloon it would no longer be a "balloon". It would start to sound a lot more like another kind of aircraft -- an airship:

An airship is an engine-driven, lighter than air vehicle that can be controlled in flight.

So from a licensing standpoint there would appear to be two major considerations: First the pilot of such a chimera would need to be licensed to act as pilot in command of an airship (not a balloon), and second the modification itself would have to go through appropriate regulatory channels, since it is changing the fundamental nature of the aircraft in a way that would almost certainly attract some scrutiny.

Specifically regarding the fans/propellers you're talking about, it looks like those are intended for use as inflation fans to help you out when you're setting a hot-air balloon up - once you've got the envelope inflated and the heater is doing its job you don't really need the fan anymore, and you would leave it with your ground crew.

As far as I can tell they aren't intended for use as engines for moving and steering a balloon - I suppose you could carry one aloft with you if you were feeling bold, but I'm not sure what the impact of doing so would be from a regulatory standpoint when it's not permanently attached to the balloon, and I'm not sure how effective they would be as propulsion with only a few horsepower behind them.

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    $\begingroup$ There's a reason they're called inflation fans... The propellers are just for replacing the built-in ones for the inflation fans, not propellers as in the ones for engines. $\endgroup$
    – Qantas 94 Heavy
    Dec 21, 2013 at 2:31

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