Oof. Probably the balanced fund and a letter to your employer - this is not a good 401K. You'd think they'd offer at least an S&P 500 fund at a more reasonable cost.
The usual advice - 401K to get any match, then I'd go to an IRA, then back to the 401K assuming there are significant tax savings to be had. ERs are high, but unless you're planning on staying a long time, you're probably still better served by a match and/or the tax savings.