Thing is, if you're going to include all the characters of Naruto, you're gonna need a bigger list with way more tiers. As it is, there are a fair few problems with the one above: no way should Itachi be on the same level as Madara/Hashirama, and why is Jiraiya on the same level as Nagato and Obito? And what's Shino doing in the same tier as Tsunade and Kakashi?
Tier 1 (God tier +): Kaguya, and probably the Rikudo Sennin at his prime (if not then on the tier just below. He'd still be stronger than Madara).
Tier 2 (God tier): Prime Madara (with the Juubi and both rinnegan). I feel content placing him a tier above Naruto/Sasuke, as they were barely keeping him at bay together (man gets his own tier).
Tier 3 (Lesser god tier): Madara (with the Juubi and one rinnegan), current Naruto, current Sasuke, Juubito, 8 gates Gai
Tier 4: Hashirama (both edo and alive versions), Madara (edo and alive)
Tier 5: BM Naruto, BM Minato, EMS Sasuke, Nagato, Obito and maaayyybe prime Tobirama and Sage Kabuto.
Can't be bothered to list anymore, just wanted to get the uber characters in there :P
Would people agree with these rankings? Might be a few I've forgotten.
@ozeol: Itachi should go Tier 2. Tier 3 moved up to Tier 2. Gai and Kisame should go in at Tier 3. The 5 Kages are Tier 2 or 3. 3 edo Hokages Minato, Hiruzen Tobirama also to T3.
Hold on, you would put the 5 kage on the same level as Hashirama and Madara? I can't agree with that, dude, there's been loads to suggest that either of them could crush the kage without much trouble.