Honestly.. I don't really see what Jiraiya is supposed to do here. I mean, he cannot offensively bypass the abilities of both Itachi, and Kisame, collaterally. The Mirror Of Yata, and The Ten-Handed Blade, are spiritual weapons, made of pure spiritual energy, so I'd assume that they are extremely concentrated weapons, stronger than when they are filled or enriched with chakra. I mean, if y'all want real life examples, take sulphuric acid for example.. Ya'll would notice that dripping it in water and mixing it'll substantially dilute it, and reduce it's potency.. Similarly, pure physical energy, and pure spiritual energy are on another stratosphere of power. Another example would be eating a box of sugar, and eating them in a less concentrated form in the form of a candy, or a biscuit.. I hope y'all get my point. Therein, I don't really see what the opposing foe can acclimatize in this scenario, tbh. It's really a glaring breadth like difference in power, in my opinion. Kisame can extrude magnificent oceans, and tidal waves, which'll indefinitely douse Jiraiya's fire techniques, and his Sage techniques would be eliminated by the aforementioned oceans, and tidal waves, overwhelming them, and engulfing them, as the former possesses significantly massive area-of-effect in contrast to the latter.. All of these inextricably linked facets of battle entails that the Red Moon Duo eliminates Jiraiya with explicitly little difficulty..
Also, I think people are grossly over-inflating Itachi's admission of inferiority to Jiraiya, tbh. I mean, sure, if you wanna argue that Jiraiya >>>>>>>>>>>>>>>>>>>> the collateral Red Moon Tribe Organization, then, by all means, that statement is legitimate. But.. if you wanna argue that, that part of Itachi's statement is hyperbolic, then I'd like to propose that it's only natural that the preceding part of his statement is hyperbolic in nature, as well. Supplementally, I'd like to add that Kisame doubts Itachi's preceding statement, and enquires on why he was fleeing from Jiraiya, when he could've implicitly eradicated him, in that simulation, with implicitly little difficulty (If we're going by the implication of Kisame's statement, and the way he worded it — it's grammatical structure, to be specific... ).