Just read a superb appraissal of the Istari on another forum:
http://www.council-of-elrond.com/forums/showthread.php?t=590
http://www.council-of-elrond.com/forums/showthread.php?t=590
The Istari were sent by the Valar to counteract the power of Sauron. The Valar choose a select number of their Maia servants to perform this task. However, they were not to use their innate Maia abilites unless there was no other option. They were supposed to counteract Sauron by wise council, not by strength of arms. Therefore, the Istari were sent to Middle Earth incarnated into the bodies of old men, save that they aged not.
There are two known ways that Maia and Valar "interact" with the physical world. The first is an "avatar", in which the Maia/Valar generates a form through telegenesis, then controls the form. Think "glove with a hand inside" or "puppet". Sauron, the Balrogs, Melian, and all physical representations of Ainu are done in this manner. The Ainu can change the form at will, and if the form is destroyed, the Ainu can usually make another. Any abilities possessed by the Ainu can be wielded through this body. For instance, if a Balrog wants a giant fireball, all the Maia controlling the balrog body has to do is think "Giant Fireball" and the giant fireball appears.
The other form is that of the Istari. In this case, the Ainu spirit was actually linked to a body (this required special permission from Eru). However, if this form is destroyed, the Ainu (Maia in this case) can not simply have another body. Also, the powers of the Maia are locked away. If Gandalf wants a giant fireball, he must first remember how a giant fireball is made, then tap into his hidden powers as Olorin, then create the giant fireball.
The staffs were granted to the Istari as a symbol of authority from the Valar, a "permission" to use white magic. In other words, the staffs are a sign of approval from the Valar for their servants to act as angels, instead of old men, if the need should arise.
The power that the Maia possesed is incredible. Remember from the Silmarillion, when the Valar and Maia got pissed, a LOT of damage was generated. Numenor is destroyed, the North is laid to ruin, etc. etc. Unless the Istari came up against another Maia (Sauron, Balrogs, etc) their Maia abilities (which they are not allowed to use) would be equal or surpassing any other foe in Middle Earth. As an example, when the White Council overthrew Dol Guldur, I would hazard that the strength of the three wizards (Gandalf, Radagast, and Saruman) made the victory possible.
As an example of how this works, consider the time when Gandalf and friends are beset by wolves (right before Moria). Gandalf holds his staff aloft (i.e. displaying the token that what he is about to do is proper) and shouts in Elvish "Fire be the saving of us! Fire against the werewolf host!" and the whole hilltop goes up in a raging inferno. If someone asks you to list off the nine planets, you would probably recall to mind a phrase such as "My very educated mother just served us nine pizzas" to remember the order of the planets. Gandalf is doing the same thing, using a phrase to remember how to turn the hilltop into fire.
The power that turned the hilltop to flame is not in the tongue (although he used elvish (Olorin's first, and most familiar, language) he could have used any language he knew. The power was not in the words, since they were just a memory device. The same spell, if spoken by Saruman, or by Radagast, would not have produced the same effect, since it was a personal remembrance tool by Gandalf as to how to use his Maia abilities. The power was not in the staff (as we shall see in a minute), but the power came from the Maia Olorin.
Were the Istari powerless without their staffs? Indeed not, but it places big restrictions on what they can do. Everytime the Istari act as an angel with other people around, they HAVE to have the staff as a symbol of authority. However, when Gandalf cracks the bridge of Khazad-dum and he and the Balrog fall into the chasm, Gandalf shatters his staff. Staff is gone, finito. Gandalf is eventually dragged by the Balrog to the peak of Zirak-Zigel, where he fights the Balrog for 11 days. Think about this for a bit. Gandalf is in the body of an old man. He is going to have limited endurance. A similar old man, such as Denethor (who was battle hardened) would not have stood up against the Balrog for more than 2 minutes, tops. Somehow, Gandalf was able to match the fire, shadow, and strength of the Balrog for 11 days before finally defeating the bugger and throwing him down the side of the mountain. Yet his staff was broken. The only way this would be possible if he was fighting using his power as Olorin. This is part of the restrictions placed on the Istari from the beginning, they were not to use their powers to gather worship from others.
Saruman never fell to the dark side completely. When he imprisoned Gandalf at Orthanc, he never took Gandalf's staff (unlike the movie). Saruman was not stupid, he knew he did not have the authority to take Gandalf's symbol of authority by force. A civilian or a police officer can not take another officer's badge; the badge is bestowed and removed by the captain of the police, or some other figure of authority of greater rank). When Gandalf the White confronts Saruman, he first requests the staff of Saruman (playing nice, no rules broken if Saurman surrenders the staff willingly). When Saruman refuses, Gandalf destroys Saruman's staff. He had received authority to do this from Eru. Saruman still had his abilities (such as his voice, with which he persuades Treebeard), but his permission to act as an angel had been revoked.
Saruman could have still used his Maia abilities, but this would have been a BIG no-no. He knew that Gandalf had returned from death. He knew (at least when Gandalf hauled him back to the railing) that Gandalf had been enhanced far above himself. Saruman knew at that point that Gandalf had been in direct contact with either Eru or the Valar, and that he had been told on, and so he (Saruman) was already in big trouble with the Valar. He was not stupid enough to deliberately P.O. the Valar by using his Maia abilities without permission. If he had abjectly humbled himself, and sought the pardon of the Valar, it would have been granted (there would be punishment, but eventually he would have been allowed to return). Gandalf, Galadriel (and Frodo) spared Saruman, hoping that he would still find a cure and redemption, but he repeatedly chose to reject offers of friendship and aid, and chose instead to continue to cause trouble, and so when he was slain, he was rejected by the Valar and cast into the Void.
On a side note, Radagast could converse with the birds and animals. It says that he is a master of colors and shapes, so it is reasonable to assume he is a camoflauge expert bar none, practically invisible if he so chooses, and possible with the ability to shape-shift as well.
