There must've been a point when Itachi surpassed Orochimaru, and by surpassing Orochimaru, he must've surpassed Sarutobi since Sarutobi had aged. I'm also assuming that if Itachi surpassed Orochimaru, he must've surpassed or been on par with Tsunade (I know that with Jiraya it's up in the air). It's just hazy for me if Itachi surpassed Orochimaru (and perhaps the 3rd Hokage) during his time in Konoha, or if he surpassed Orochimaru after he defected and became part of Akatsuki?
If Itachi was stronger than Sarutobi while he was still in Konoha, and if what Madara stated was true, wouldn't it have been in Sarutobi's/the Elder's best interest to name Itachi the 5th to avoid conflict with the Uchiha clan? According to Madara, Itachi's loyalties were undivided and his loyalties were to the Elders and the 3th Hokage. Madara portrayed Itachi as unconditional to them and to their rule. Although an Uchiha, Hokage Itachi could've easily served as mediator between the Uchiha and the other clans, and the Uchiha massacre could've been avoided. I doubt the Uchiha clan would've tried a coup d'etat against one of their own, and the Elders would've had Itachi's ear and loyalty when it came to domestic policies. If Itachi had been named the 5th, Orochimaru would've probably thought twice about invading Konoha and/or going after Sasuke. Also, Akatsuki woul've had a hell lot more of a tough time trying to get their hands on Naruto with Itachi as Hokage and Jiraya as Naruto's sensei.