This is predicated on the idea that DitV isn't a mechanical game, it's a psychological one.
It's not balanced--mechanically.
Yes, you get more dice for failing. Fallout can be made part of the advancement process. There are a lot of ways to game the system, and it doesn't care. DitV has no interest in mechanical balance or sense. Instead, DitV is balanced around being interesting (in the creator's sense of the word) and its mechanics are all molded to that whim.
It encourages future conflict.
Your d4 from Fallout is probably going to be attached to something… unfortunate. So in order to use it, you'll have to force your Dog to keep poking that old wound, whether physical, social, or emotional. Remember:
When you take a Relationship with a person, you’re saying that you want to be in conflict with him or her. (DitV 98)
Now your d4 is sitting there saying "To use me, you'll have to embroil yourself in that conflict again!"
It tempts you to overextend.
Stockpiling d4s is negative because sitting at the table with a bunch of d4s is going to tempt you to stay in when all you're going to be able to do with them is take more blows.
In that way, it's almost like a pre-compel in Fate: I'll give you this Fate point now if you promise to do something stupid later.
Remember: interesting, emotionally wrenching, philosophically challenging stories are the real goal of the game, and it does this not through mechanics that force you into such situations, but through mechanics which manipulate you into them. In that context, d4 Fallout makes perfect sense.