For brevity, I’ll call your points $x_0$, $y_0$ just $x$, $y$, and your balls $B = B_{r}(x)$, $B' = B_{\delta}(y)$. I claim that for every $\delta \in (0,r)$, $B' \setminus B$ is connected. (In fact it’s true for all $\delta > 0$, but I’ll only show it for $\delta < r$.) Here are sketches for a couple of simple and geometrically intuitive arguments:
(1) Let $z$ be the point of $\partial B'$ directly opposite $x$. Then (a) some small ball around $z$ is disjoint from $B$, so its intersection with $B'$ is convex, hence a connected subset of $B'\setminus B$; and (b) for any point in $B'\setminus B$, the line segment from it to $z$ is disjoint from $B$ (since distance from $x$ increases as you move towards $z$), and so gives a path from that point into the known connected subset.
(2) Taking the problem as given for dimension 2, we can get it for higher dimensions as follows: Take $z$ to be any point in $B' \setminus B$ lying on the same diameter of $B'$ as $x$, so that $(x,y,z)$ are collinear — for instance, $z := y - \varepsilon(x - y)$ for some small $\varepsilon > 0$. Now I claim any point $w$ in $B' \setminus B$ has a path to $z$ lying within $B \setminus B'$: Given any such $w$, there’s some plane $P$ containing all four mentioned points (generally, any three points in $\mathbb{R}^n$ lie in some plane; taking a plane containing $x$, $y$, and $w$, then it must also contain $z$ since $(x,y,z)$ are collinear). Now intersecting everything with this plane, we reduce to the 2-dimensional version of this situation, so taking that as known, $w$ must have some path to $z$ lying within $(B \setminus B') \cap P$. This shows that the problem is essentially just 2-dimensional.