I'll agree with Y The Alien that this seems an odd thing to have a long debate about.
First off, I don't read the manga, so I have no problem with being proven wrong. But here's my opinion.
The hypnosis doesn't work on people who aren't looking at the sharingan user's eyes. Looking at the person's feet would protect you from the hypnosis, but you'd probably get jacked by something else.
The sharingan does give the user a tremendous advantage regardless of the hypnosis.
Itachi does seem like the strongest person right now, and can probably beat anyone (not sure about Jiraiya).
Jounins are in a completely different class of speed/strength from genins (and probably chuunins). They could all probably fight effectively against Lee (if he doesn't unlock gates).
The Gai vs Kakashi rivalry is probably mostly a good match-up because of Gai's taijutsu vs Kakashi's ninjutsu. From what Gai says, it seems that he's able to avoid genjutsu from the Sharingan. So for those of you who wonder why it's even a great rivalry when the Sharingan can't hypnotise him, it's because of the other techniques that Kakashi has copied. He is Konoha's #1 technique specialist after all.
And I get the impression that Gai is much stronger/faster than Kakashi. He hasn't shown any indication of ninjutsu or genjutsu (not saying he can't, just that he hasn't), so probably spends all his time working out. If he wasn't considerably better at taijutsu, then he'd get owned by Kakashi's ninjutsu.