Yes, that's correct. For the sake of an extreme example, if you have 175 AC and 20 Discipline, and you're fighting someone with like 25 AB (after any reductions), no matter what, if they hit you with a knockdown attempt, you will get knocked down, because they needed to roll a 20 to hit you anyway.
For classes who do not have it as a class skill, Discipline can get pretty high if you skill focus and cross class in it and have a lot of enchanted gear with a bonus to that. What this will do is protect you while you aren't buffed, or protect you from characters who can't even knock you down if they make an attempt with a 20 (which isn't an auto-success; you will be hit, but the game will alert both attacker and defender that the knockdown attempt was resisted).
If someone can only hit you on a 20, they're probably going to knockdown just so you can't fight back. The characters who can't max Discipline have other ways of avoiding damage, usually magic or stealth or something.
Balance doesn't really come into it. NWN doesn't port all of the tabletop game's mechanics 1:1, and even the base game is very different to our server. In some ways, it's good that offensive tactics are generally stronger than defensive ones, but the game wasn't balanced for PvP and usually the scales will be pretty tilted one way or the other. The meta of achieving high minimum scores to avoid failure in a game where you are supposed to experience many successes and many failures also disrupts this design, but it can be thrilling at times, even if it's frustrating at others.