I suspect that if Madara didn't get the rinnegan-eyes, 1st-DNA, and zombie invulnerability, he would have been beaten by now.
But since he did get those power-ups, and he is winning (so far), he talks big, like he was always this strong.
As far as the "you're nothing compared to (so-and-so) in the past", keep in mind an old saying: the further back the fishing trip, the bigger the fish that got away.

These dudes were impressive, but when you have the egomaniacs doing the remembering, they are going to exaggerate how strong they were. ("I only lost to the ninja because he had a 90 ft sword and the chakra of a 17-tail beast! And he got lucky! Otherwise I would have totally pawned him.")
I don't think that is what Kishimoto is trying to do, though. Why have Tsunade basically accept that particular criticism if it's not true. Her response isn't "You're wrong, I'll prove it," but "You're right, but I can still kick your ass."
The Sage of Six Paths is set up as the strongest ninja ever right now and it would appear that Madara and Hashirama are a step below with everyone else falling below that. Although, based on his Edo Tensei in Part 1, you wouldn't know it with the 3rd (and not even at his best) holding his own against both him and the Second. It's like their two different ninja. I attribute that to likely not having not planned this far ahead at the time or being derailed with a lot of the Part 2 power-ups of other ninja.
And you know, now that I think about it...the Third was far more concerned with preventing the Fourth from reviving than the First. It really doesn't mesh with the man the first has been portrayed as in Part and I don't have any reason to think that Kishimoto means to say he isn't as great as everyone keeps saying.
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Madara has benefitted from getting zombie-invulnerability and several power-ups from Kabuto (including the rinnegan)
Madara stated he "unlocked" it before he died. Unless that translation was wrong, the Rinnegan did not come from Kabuto.
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Maybe I'm wrong, but I think the current ninjas are much better at information gathering. They are having a tough time when encountering new foes, but the longer the fight goes, the better they will do. Pein was only defeated due to the intel by Jiraiya and Kakashi (and Naruto still almost lost). Quite a bit of the army was assassinated by the Zetsu clones, but after Sakura's elbow drop (hee hee) and masterful insight into Zetsu's "uhh... not really" (which let her figure out *everything*), the killings stopped.
This seems more like a province of the the "good guys" rather than one of the newer generation.
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As for the Tsunade stuff, I agree with ciardha, madzy, et al.: Madara is goading her. However, Kishimoto has used this as a plot device to create a conflict between the two. My problem is not that it's sexist, it's just that it's kind of pointless. Madara has lots of reasons to want to take Tsunade down. And Tsunade has lots of reasons to want to fight him. It doesn't need to be because she's a weak woman, or the group medic.
My sentiments exactly. When I saw that line, I was like, "No, no, no." Why are you reaching for cheap literary tropes when there is no need and when you set out a bunch of far superior reasons to single her out that far more compelling than that line? I was enjoying this chapter until that line. He gave a good speech and gave the appearance of a intimidating opponent (with an epic bout to follow) and Kishimoto cut his knees out from under him by reducing him to a sexist jackass.
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And remember, Naruto also knows the truth about Sasuke. Whatever truth that is. He cut off the frog's prophesy saying he already knew it. So that's an important fact as well. Naruto already knows what lies ahead on Sasuke's path. (This is the ultimate power-up: Naruto's fortune-telling-no-jutsu.) A bit disappointing because, as I've already said, this takes the focus off Naruto and shifts it to Sasuke's development.
This may be the first time in a long time where I care more about seeing more of Sasuke and don't give much of a rip about what Naruto is doing at the moment. I have had more opinions of Sasuke than any other character and have at times loved and hated him. This is really the second or third time time since Team Taka (please Kishi, kill them off) that I've liked his character. With Itachi's redemption, Sasuke has become the more interesting of the two because there are so many deep-seed problems surrounding Sasuke...while Naruto is more about fulfilling the prophecy and the generic saving the universe.
Naruto's most interesting story lines were saving Sasuke and the Cycle of Hate, but Kishimoto has so simplified both of those that he sucked much of the interest from them. For the Cycle of Hate, it runs so contrary to the way people normally behave and feel, especially when wronged to the degree that some of these people have. People wanted retribution or at the very least, punishment and would not understand nor accept Naruto's ideal or at least...do so very easily. Unfortunately, the opposition to both of Naruto's goals and ideals has been nothing short of pathetic. I don't feel his belief system has ever been truly, either the challenge is weak (Raikage) or bypassed (Nagato/mass resurrection) It's probably my biggest gripe of the entire series.
Back to Sasuke, this chapter made me feel bad for him and further cemented that Itachi isn't really or even deserved redemption. As I understand it, Itachi declined to tell him and manipulated his emotions because (1) to protect the clans name and, now (2) so he would have to answer for his crimes against the clan. How utterly selfish. He attempts to sound remorseful, but it comes off as self-centered. He psychologically abused his brother for years and manipulated his emotions so that he himself might face justice. His brother is a complete wreck because of it. After that, I don't blame Sasuke for not wanting to follow his path.
In addition, Itachi says he spared him partly because he was a kid of that he didn't know. The implied assumption almost must be that there were no other kids or people who didn't know because Itachi comes off as an inhuman monster and the most selfish character of the manga if that assumption isn't true. At the same time, if it is it's one of the explanations that is tough to buy.
I ultimately felt bad for Sasuke because his whole life everyone around him has been manipulating him for their purposes. Itachi, Madara, Orochimaru. I even wonder about the village because Kishimoto never lays out what was done for Sasuke in the aftermath. We're they only concern about rearing a strong ninja? It's not certain. Sasuke, to me, comes of as a confused 16-year kid with full of hate and negative emotions who is completely ill equipped to deal with them. When Madara tells his the story (and even if it were the truth), he took away his only too for dealing with these feelings: revenge against his brother. He replaces it with something else. Sasuke's reasoning for targeting the whole of Konoha is really weak and this chapter certainly didn't help, but it is expected because I think in many ways he cannot deal with those emotions and simply needs an easy target to direct them all to, and Konoha is the easiest available to him.
I'm not sure getting the truth from Itachi will change him mind. If it's were just about false info then, yeah, it could, but it's more complicated than that. I'd almost hate it if it did because it would be almost too easy. Sasuke could then simply redirect them again at a villain rather than have to deal with his issues At the time same time, I wonder if he Naruto does force him to deal with them, if it'll fizzle out like Nagato.
Virtually, everyone in his whole life has failed him. Team 7 didn't (or at least came the closest to not doing it and I think because of that the final fight ought to heavily involve all of them and not be just Naruto v. Sasuke Part II).
I do want to add, that even with this I still believe Sasuke should still be held to account. What he has chosen is wrong and should be obvious that it is (especially the genocidal part), but I find him more interesting as a character because it. So, Itachi redeemed...no way. This chapter makes him look so bad.