Disclaimer- I am not scientist. I've never claimed to be one. Take my advice at your own risk.
I've heard that a fish's sense of smell is great. I would think that something such as a moth ball would eventually be coated in some sort of petroleum product that would leave an invisible scum lime on the water smelling like a moth ball. Since most fish face into the current, any water that has picked up the scent of the moth ball would get to the fish before the fly, lessening the chance of catching that fish.
If you're wanting to keep bugs out of them, just put them in a zip-lock and throw them in the freezer.