Such a popular, thrilling and yet unresolved question and topic
But I won't contain myself, trying to use though at the same time not too much words
I think that we could quite surely say that Galadriel is the most powerful being in Middle Earth in the Third Age; although there are various interpretations about the powers of the Lady of Light and her status in Middle Earth, there are also solid facts
1. In the Third Age the World (Middle Earth) was grey, dark and disenchanted, a place in which the Elves were diminishing and leaving, almost becoming characters of the legends of Men.
Galadriel is a more-than-8000-year-old royal elf (or 20000-year-old if we use the other version of the computation of the Years of the Trees/Years of the Valar), older than the Sun and the Moon, blessed by the holy and legendary Light of the Two Trees, accounted as the fairest and very powerful among the Noldor even in Aman, scholar of the Valar in Valinor and of the Maia Melian in Beleriand, the only one of the Exiled that survived the rebellion and the War of the Jewels, and keeper of Nenya.
She was obviously an unique character and an exception even among the mightiest Elves of Middle Earth in the Third Age, the only remnant left of the Bliss of Valinor and of the Splendour of the Elder Days.
2. For the reasons stated above, she is the mightiest and fairest elf of the Third Age (exact words of Tolkien) and the 'de facto' queen of the Elves in this Age.
She is basically invincible in her own realm, Lothlórien, and Sauron could have never defeated her without the One Ring; she was able to see through his mind and will, while he couldn't.
3. She established herself the White Council and had the power to indicate its chief, even though Gandalf refused her offer.
4. The Istari were sent to Middle Earth with heavy restrictions placed upon them by the Valar; they were bound to take the bodies of old men and experience all the pains and sorrows of their physical bodies, they were ordered to guide the Free People instead of challenging Sauron directly, they lost the majority of their powers and had their infinite and immense memories as Angels in Valinor concealed in their own mind, weakening them even more (the Wizards journeyed Middle Earth, at their arrival, to recollect part of their lost and past knowledge).
The Istari can not be regarded as the Maiar that once were.
5. Sauron did not have the One Ring at that time and had lost his physical body, because he was severely defeated twice in the past and consequently lost the majority of his powers; while Galadriel increased her powers in time, the exact opposite thing.
Galadriel, though, being her a diminishing blessed elf in a dark World, did not have the role, the power or the authority to stop the War of the Ring and destroy completely Sauron, because this was naturally the task of Men and Frodo; she was ineluctably bound to leave Middle Earth to preserve her Grace.
So, if 'Power' doesn't only mean fighting or gathering armies, but has a deeper and wider meaning (and this is, I think, what Tolkien wanted to tell us), we can openly say that Galadriel was the most powerful being in Middle Earth at that time
Umfrage