I'm not really an Itachi fan, but I think he's strong, not because of his super ninja skills, but because he's smart. Like people have already said, it's not that he can't possibly win, it's that it would be a risk to face Jiraiya. He knows his oppponent is powerful and that there is a possibility of failure. So, being cautious is the best way to go. Itachi has proven to be cautious, and not at all reckless in battles, and I believe that's why he's so strong.