In this post, I will try to link Madara and Danzou together. It is my belief that Danzou is probably Madara in disguise. Otherwise, they are most certainly tied together very closely.
1) Knowledge of 'The Truth'
Madara says that the only people who know the truth about Itachi are the three elders, and that there is no way they would ever speak of the truth, and that that was what Itachi wanted. Madara states that Itachi doubted whether or not Madara knew. This begs the question:
If the elders were never going to tell anyone, and Itachi himself was not going to tell anyone, how exactly does Madara know?
Nobody would know the truth about Itachi if Itachi didn’t want them to. Itachi could easily justify sparing Sasuke to Madara by claiming it was for his own EMS. But how did Madara have in-depth knowledge of Itachi’s motives and his ultimately benevolent plans for both Sasuke and Konoha? Well, to put it another way, the only person who would have a clue as to Itachi’s true intentions would be Danzou, since Danzou exploited the fact that Itachi cared so much for the village and convinced him to kill his clan for it. Madara actually relates the entire story with knowledge of details of what the elders and Danzou were doing as well, for example, the fact that the Uchiha were under surveillance. His in-depth knowledge of the actions and intentions of both Itachi and the elders strongly suggests that Madara is connected with Danzou.
2) The Training
Both ANBU and the Mist village were known to employ similar methods of training; a program that culminated in a duel to the death between fraternal friends. Madara is no stranger to such an experience, as he murdered his best friend decades ago, and it did make him stronger as a ninja. For Danzou, it helped to create obedient subordinates. We know that Madara is/was the Mizukage, and that the Hidden Mist employed similar methods of training. It would seem this is Madara's own special training program.
Notice here Madara says that he was looking for an 'opportunity for war'. This choice of words is not valid if Madara is not a leader of some kind: either Mizukage or Danzou or both.
3) Itachi and Madara
Madara states Itachi was the only one who discovered that he was alive. This makes no sense whatsoever. How does Itachi, a child resident of Konoha, become enlightened with knowledge that even Jiraiya did not know to certainty? Madara wasn't exactly parading himself around Konoha for all to see. If Danzou is connected to Madara, and Danzou is Itachi's source, then it makes sense.
According to Itachi, Madara was his teacher. It is worthy of note that Madara does not mention training Itachi to Sasuke because he wouldn't want to associate himself with Danzou or with training a man knowlingly for the purpose of massacring the clan.
So, what could Itachi be talking when saying that Madara was his teacher?
Itachi was talking about none other than the notorious 'kill your friend' program. Madara/Danzou trained Itachi in two ways:
A- Madara disclosed to Itachi the secrets of the sharingan: the MS and the EMS. Itachi planned his future and that of Sasuke with this knowledge. This explains how Itachi ever came to know of the MS.
B- Madara related to Itachi his own, personal story, and trained Itachi to kill or suppress his emotions, just as Madara had to do during the days of endless battle and slaughter, when Madara even used his own friend and brother. This explains how Itachi came to know of Madara's past. An integral part of it all would have had to have been killing Shisui. Murdering Shisui, who was very close to Itachi, was important for the MS and for fighting his emotions and a taste of what was to come.
It is also important to note that there is no way Itachi left the village to be trained. It's difficult to imagine that a 13 year-old could leave the village for training every now and then, and there is no evidence to suggest so. It is more logical to think that Itachi was trained within Konoha, by Danzou/Madara. Itachi would have been spending much of his time with Danzou anyway after he was drafted into ANBU, and it is noted by the other Uchiha that Itachi's attitude changed soon after he joined the black ops. He also murdered Shisui after he joined ANBU, and this shows the Madara influence, because as explained earlier, Itachi would not have known about the MS otherwise.
4) The Massacre
We learn that in all likelihood, Danzou was the who one suggested the idea of the Uchiha massacre. Here, notice that Danzou is the only one shown in the top-left, and he is the most assertive of the elders anyway. The 3rd tried for a truce but failed. One would expect that if Danzou really did oppose the 3rd and his philosophies, that he would take sides with Uchiha and actually help them with the coup. But instead, Madara/Danzou went against the Uchiha, because he harbored hatred towards the Uchiha as well as the village. But, this isn’t all.
Not only did Madara/Danzou pass down the order for the massacre to Itachi (black ops agent), but Madara got to actively participate in the action himself. So, this is what the story is if Madara and Danzou are not linked in any way: Danzou orders the massacre, Itachi miraculously discovers Madara is still alive and then asks for his help. This is very convenient, perhaps a little too much, as Madara gets to indulge in his revenge without actively setting it up (because he was asked by Itachi), thus remaining ‘clean’ enough to get Sasuke on his side? To me, it’s more like Madara was looking for an opportunity for revenge, and when Itachi showed up, he had the means to do it. So, Danzou/Madara orders the massacre, reveals the truth about Madara to Itachi and that he should seek him for help, for both the massacre and the training (or Danzou simply reveals that he is Madara).
I am also entertaining the thought that it was Madara who manipulated the Uchiha into planning a coup d’état in the first place, thus creating a basis for the massacre. I think he could have done this in two ways:
A- Danzou could have told the Uchiha that they should overthrow the 3rd, and that his black ops division would assist them. Firstly, Danzou is firm in his opposition to the philosophy of the Hokages, as Tsunade says. We know that he actually fought the 3rd for the title as well. Therefore, the Uchiha would have seen him as a potential ally. Secondly, it has already been hinted that the Uchiha thought they had allies in ANBU.
B- Madara could have provoked the rebellion indirectly using the Fox. After unleashing the Fox, everyone grew wary of Uchiha and they were isolated by Danzou, and the 3rd opposed it.. Moreover, it was Danzou's black ops that were in charge of monitoring Uchiha. Danzou subjected Uchiha to increasing pressure and discrimination until Uchiha felt like they had no other choice but to fight for their freedom and their pride as a powerful clan. In effect, Danzou forced a rebellion, and if he really opposed the 3rd and not Uchiha, he shouldn't have discriminated against them. It is clear that had he wanted, Danzou could have avoided discriminating against Uchiha and seemed like he was giving them the benefit of the doubt after the Fox attack. He would have had the 3rd's support as well, and thus would have succeeded.
The bottom line is that Danzou/Madara could have used one or both of the above means to induce a coup d'etat.
5) Danzou's Rebellion
Danzou seems to have foreknowledge of Pains attack. The elders clearly say that Danzou said it was Akatsuki’s leader attacking.
Of course this begs the question, how did Danzou know?
The only people who should know are the remaining Akatsuki who were at the meeting. This strongly suggests a connection between Madara and Danzou.
Furthermore, Danzou seems rather well prepared for a coup, considering that Pain’s attack should have had the element of surprise. In fact, his predictions seem a little too accurate. Not only is Danzou right about Tsunade having no clue about the rebellion, but Danzou predicts that the village will avoid complete destruction because of Tsunade and Katsuya. This is remarkable. Firstly, for anyone to assume that two ninjas can actually take on an entire village is absurd; it would appear Danzou knows somewhat of the abilities of Pain. Secondly, it has played out exactly as Danzou said: Katsuya protected everyone from Shinra Tensei. Danzou's use of the words 'total annihilation' is rather odd, and it almost seems like he is predicting Shinra Tensei.
In any case, how could Danzou's actions be so well-suited for the circumstances, and his predictions so accurate, if he has no connection with Pain or Madara?
The timing of Danzou’s rebellion in relation to Itachi’s death is significant as well. We learn that Itachi warned Madara not to 'touch' Konoha, but as soon as Itachi dies, Madara says that Konoha is no longer off-limits. Madara predicted the outcome of the Itachi-Sasuke battle (as he knew 'the truth'), so he knew Itachi would die. As soon, as Itachi dies, Pain is sent to Konoha to wreak havoc, and Danzou is perfectly prepared to rebel. Again, far too convenient. Now, ROOT could have rebelled after Orochimaru’s invasion, but they didn’t, possibly because Madara did not want to take action during Itachi’s lifetime. It was an excellent opportunity though, as Konoha was left damaged and without a Kage.
So why didn't he?
Itachi threatened Madara, but with what? I think Itachi said that he would reveal that Madara was Danzou or that he was Mizukage if Madara did anything to Konoha or Sasuke. Madara says that Itachi was the only one who knew of him (perhaps Itachi was the only one who knew that Madara is Danzou). I think that Itachi could not have killed Madara by himself, otherwise there was no reason for Itachi to leave him alive in the first place and risk his brother's fate. Therefore, I found this(middle-right frame) thought of Madara's to be puzzling. But now, I think that Madara was not referring to Itachi killing him, but instead referring to Itachi revealing his identity and existence, which would eventually lead to Madara's demise at the hands of Konoha and perhaps even the Mist. Had Itachi known that Madara was aware of his secret, Itachi might have revealed the truth and endangered Madara. I also think that the reason Itachi returned to Konoha after Orochimaru's invasion was to prevent Danzou (Madara) from doing anything drastic or from becoming Hokage after the 3rd died. I believe this is how Itachi protected the village and Sasuke from Danzou.
6) 'X' Marks the Man
Last but not least, the wall behind Madara here is marked with an X, and a similar X can be found on Danzou's chin (credit to sumtheory for posting this find). The X appears just as Madara explains that he felt betrayed, almost as if marking the beginning of Madara's revenge. And now Danzou, a man heading the currently looming rebellion, is marked with it.
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In conclusion, I think that it is quite likely that Danzou is Madara. If not, then Danzou is most certainly collaborating with Madara.
Please read the spoiler below for preemptive answers to certain questions.
Q1- How can Madara be in so many places at once, and how can Madara and Danzou be of different heights?
1) Madara can be in distant places in a short space of time, thanks to his teleportation ST-jutsu. However, this is not even an issue in Narutoverse because of the shadow clone technique. As yet, no limitations of the technique are known with respect to duration or distance. Yamato used a cloning technique at quite a distance, and even managed to demonstrate communication between clones.
2) In a world where little boys can transform into mature women, appearance is not an issue. A simple henge is all Madara needs to turn into a decrepit Danzou.
Q2- If Madara is Danzou, why did he send Sai to kill Sasuke given Madara's interest in Sasuke?
1) To test Sasuke’s development. Note that Danzou sent the strongest person in Sasuke’s generation.
Furthermore, notice that when Sasuke breaks Sai’s technique, Sai immediately remarks upon Sasuke’s strength.
However, this is not all. Madara may also have used Deidara for the same purpose. He himself helped Deidara in the fight. After the fight, Madara expresses his acknowledgement to Pain, saying that Sasuke will surpass Itachi, almost as if the fight with Deidara was a means to test Sasuke.
Madara’s reiterates his interest in Sasuke here.
Furthermore, Madara reaffirms his faith in Sasuke's ability before and after the fight with the 8-tails. Again, Madara could have captured the 8-tails himself, but I think he was interested in Sasuke's performance.
2) Another reason Madara may have done it was so that Sasuke wouldn't suspect Danzou is Madara. It is clear that Sasuke desires to kill Danzou and the advisors after hearing Madara's story. If Sasuke were to find out that he was Danzou and that he had the major hand in the massacre, Sasuke would obviously go after Madara instead of collaborating with him.
Q3- Why does Danzou prevent Naruto from returning if he is Madara?
1) It is uncertain whether or not Madara actually wants Pain to get a hold of the 9-tails. Madara here tells Pain failure will not be accepted. Konan says he is invincible, and Madara simply smirks. The only person to know of the Fox’s true power is Madara, and Pain is clearly astounded. Minato says Madara is using Pain. Pain may even be aware of this, and perhaps Nagato this frame which hints at Nagato crying right after Madara leaves is evidence of that.
Madara hasn’t availed opportunities to capture Naruto earlier, and Madara clearly promises Sasuke one of the bijuus. Now, at the time, 7 had been sealed, and Sasuke was supposed to bring the 8-tails to be sealed. By elimination, only the 9-tails is left, and it is no coincidence that the MS can control the Fox either. Thus, I believe Madara is not true to his word with Pain.
Therefore, if Madara wanted the Fox back he could have had it, but he is using Pain (as Minato said) for a different end; setting up the coup. I do not doubt that Madara will want the Fox back at some point, but it hasn't been the priority, and not for a long time, which is why Madara did not fight to protect it from Minato 16 years ago.
2) One less strong ninja means that there would be more damage by Pain, and an easier ensuing coup as well. I do not think Danzou is an idiot: he won't expect Naruto to become his puppet, but instead be well aware, like the rest of the village (chapter 426) that Naruto has inherited the Will of Fire and will, if anything, oppose his rebellion. Therefore, Danzou is not keeping Naruto away from Konoha because he believes that he can use Naruto after Pain is gone, but there is another reason, and Madara has already acknowledged Naruto as a ninja here and he would know of the Fox's power as well. Thus, keeping Naruto away would have been important for the coup to go smoothly.
Q4- If Danzou wants to be Hokage, then why would he want Sasuke to attack the village?
1) By creating a common enemy in Danzou, and by having him become Hokage so that Sasuke cannot easily reach him and kill him, he has created a means to continue manipulating Sasuke.
Kisame states that the ‘higher-ups’ will be shielded by others. Now, Danzou is attempting to become the highest-up by becoming Hokage. Madara states that Akatsuki are not powerful enough to destroy Konoha, and since the objectives of Akatsuki and Hawk coincide, they should work together. He then immediately reveals to Zetsu that he has Sasuke on his side; by having a common target, Madara believes he has Sasuke on his side.