Give them more time - it can take MONTHS for dogs to warm up to each other. It's only been a week and Belle is adjusting to a new environment and finding her 'place' in the 'pack' while Baloo is adjusting to a new puppy being around and your attention being divided between them. I wouldn't worry too much about her nipping at him when he's sniffing at her - she doesn't want him there and he'll learn not to do it. As far as her getting posessive of YOU and nipping or being aggressive when he comes near you - nip that behavior in the bud ASAP! I've seen dogs turn into absolute monsters over their owners. Don't let her become posessive of you. She's going to try REALLY hard to become the alpha dog in your house and will likely display some dominant behaviors. If Baloo is as big of a sweetheart as you say, he may not put up much of a fight. If anything, you should be paying even more attention to Baloo (first treats, first food, first to get attention, etc.) so that he doesn't resent her presence and knows that she isn't his replacement.
My Oscar is like your Baloo - he is the biggest sweetheart, doesn't bark, not an aggressive bone in his body. I brought Ruthie home when Oscar was 9mths old - she was 3mths. She couldn't be any more different than Oscar personality wise. She's frisky and crazy! She has a much stronger personality than Oscar and has pretty much succeeded in becoming the Alpha at my place (next to me of course
). She's never been possessive of me though and never gotten too aggressive with Oscar to the point of nipping - she and Oscar were fast friends from day one.
If Belle and Baloo are already playing a bit and sleeping together, then they're probably doing ok and they'll become good friends at their own pace - eventually I bet they will be inseperable!