[amyrlis]

In speaking of the power of the istari and its restrictions of use, I usually don't think of it in physical terms. I mean, I think that Gandalf has (always had, grey or white) the physical power to vie with a balrog, or even Sauron for that matter (not to say he'd WIN a physical battle w/ Sauron, but he could hold his own). In the instance of the fight with the balrog, I would also say that he was not restricted from using it. In my mind, the type of power that Gandalf had, but was not permitted to use, was the power to bend the will of men or elves. He was not to take on a position as a leader or ruler of these or any races, even in an effort to do good. Sauron had this power to set himself up as a tyrant, therefore, I believe Gandalf had it too, but this was the "hand tied behind his back". Gandalf, instead, offered wisdom and guidance, and kept his nose (and therefore an influence) in all that was important. He also performed feats that changed the course of unfortunate events, such as bringing the sun up early to turn the trolls to stone. But he was not the one who slayed the dragon. You see, he was sent to "aide" in the victory of good over evil, not to be the victor. So it is more of a moral/ethical restriction of power, as mentioned above by Mr. Underhill.

Just a little note on disembodied vs. incarnate regarding Gandalf & Sauron: Remember, in the Fall of Numenor Sauron escaped only by relinquishing his physical form, at that point he lost the ability to take a shape which would allow him to "walk among humans or elves" again. So, although I haven't made up my mind as to whether a maia is more powerful with or without a physical body, Sauron (even in his non-physical form) would not have been MORE powerful than Gandalf (in a physical form) just because of this.