Gandalf and Sauron both were Maiar and were created in the same way, I presume.
1.) Was Gandalf (Grey or White) powerful enough to kill/defeat Sauron? He did kill the Balrog, who was similar too.
2.) If not alone, could he use Sauron's ring and all other three elven rings with the Lady Galadriel to end this menace?
Whether Sauron is portrayed stronger or Gandalf that is not my complete question,i wanted to know what if Gandalf really tried with all other with/without the RING.
Leaving aside the issue of the limitations placed on the Wizards (which may be more on the honour system than any real limitation), let's take a trip into speculation land; using the full power available to him, could Gandalf defeat Sauron in a direct confrontation?
Gandalf himself certainly doesn't think so (emphasis mine):
I have spoken words of hope. But only of hope. Hope is not victory. War is upon us and all our friends, a war in which only the use of the Ring could give us surety of victory. It fills me with great sorrow and great fear: for much shall be destroyed and all may be lost. I am Gandalf, Gandalf the White, but Black is mightier still.'
The Two Towers Book III Chapter 5: "The White Rider"
And this is Gandalf the White, who had undergone an "enhancement" of his powers; it seems unlikely that Gandalf the Grey would have been more confident.
Additionally, as pointed out in Lord Bubbacub's answer, Gandalf lacked confidence in his abilities even when he was Olórin:
Manwë replied that he wished Olórin to go as the third messenger to Middle-earth (and it is remarked in parentheses that "Olórin was a lover of the Eldar that remained," apparently to explain Manwë's choice). But Olórin declared that he was too weak for such a task, and that he feared Sauron.
Unfinished Tales Part Four Chapter II: "The Istari"
None of which exactly inspires great confidence.
Tolkien talks about this in his Letters; although he's coy on whether or not Gandalf could actually turn the Ring against Sauron, he does say that Gandalf would be one of the few for whom it would be a plausible goal:
Sauron would not have feared the Ring! It was his own and under his will. Even from afar he had an effect upon it, to make it work for its return to himself. In his actual presence none but very few of equal stature could have hoped to withhold it from him. Of 'mortals' no one, not even Aragorn.
[...]
Of the others only Gandalf might be expected to master him – being an emissary of the Powers and a creature of the same order, an immortal spirit taking a visible physical form. In the 'Mirror of Galadriel', 1381, it appears that Galadriel conceived of herself as capable of wielding the Ring and supplanting the Dark Lord. If so, so also were the other guardians of the Three, especially Elrond. But this is another matter. It was part of the essential deceit of the Ring to fill minds with imaginations of supreme power.
[...]
Confrontation of Sauron alone, unaided, self to self was not contemplated. One can imagine the scene in which Gandalf, say, was placed in such a position. It would be a delicate balance. On one side the true allegiance of the Ring to Sauron; on the other superior strength because Sauron was not actually in possession, and perhaps also because he was weakened by long corruption and expenditure of will in dominating inferiors. If Gandalf proved the victor, the result would have been for Sauron the same as the destruction of the Ring; for him it would have been destroyed, taken from him for ever.
The Letters of J.R.R. Tolkien 246: To Mrs. Eileen Elgar (draft). September 1963
Assuming Gandalf was capable of turning the Ring against Sauron, he would have defeated him just as surely as had the Ring been destroyed. Of course, this would introduce whole new problems, but that's neither here not there
Even if they are the same kind, it doesn't mean one is as powerful as the other. Just like other creatures have differences in power and other attributes, Maiars have the same setting.
+ In the ROTK, appendix B - under the heading "The Third Age", there is mention of this.
"It was afterwards said that they came out of the far west and were messengers sent to contest the power of Sauron, and to unite all those who had the will to resist him; but they were forbidden to match his power with power, or to seek to dominate Elves or Men by force or fear."
ADDITION: For kstb's comment below (because of character limitation, I'm putting it here)
Saruman's initial proposal to Gandalf:
"A new Power is rising. ... We may join with that Power. It would be wise, Gandalf. There is hope that way."
was subterfuge, a mere rhetorical device with which to start the conversation that eventually revealed Saruman's actual intent:
" '... why not Gandalf?' he whispered. 'Why not? The Ruling Ring? If we could command that, then the Power would pass to us. That is in truth why I brought you here. ' "
Saruman never had the slightest intention of joining Sauron. As Gandalf pointed out:
"... only one hand at a time can wield the One, and you know that well, so do not trouble to say we. ... the choices are, it seems, to submit to Sauron, or to yourself."
Saruman's unspoken intention for centuries was to possess the very talisman containing Sauron's power, his Ruling Ring. As he told the Witch-king of Angmar:
"I know what you seek, though you do not name it. I have it not, as surely its servants perceive without telling; for if I had it, then you would bow before me and call me Lord."
Saruman would have justified his actions as being entirely consistent with his commission from the Council of the Valar. After all, his actions were designed to thwart Sauron.
He was thinking deep, for his own benefit.
Gandalf whose maiar name is Olorin was one of the weakest Maia as evidenced by this quote from the council of ainur in 'the unfinished tales':
It was resolved to send out three emissaries to Middle-earth. 'Who would go? For they must be mighty, peers of Sauron, but must forgo might, and clothe themselves in flesh so as to treat on equality and win the trust of Elves and Men. But this would imperil them, dimming their wisdom and knowledge, and confusing them with fears, cares, and weariness coming from the flesh.' But two only came forward: Curumo, who was chosen by Aulë, and Alatar, who was sent by Oromë. Then Manwë asked, where was Olórin? And Olórin... asked what Manwë would have of him. Manwë replied that he wished Olórin to go as the third messenger to Middle-earth... But Olórin replied that he was too weak for such a task, and that he feared Sauron. Then Manwë said that was all the more reason why he should go...
Given that Sauron was the most powerful of the Maia I think it is unlikely that Gandalf would have been able to best Sauron in direct combat. However one could argue that he did beat Sauron through the use of his mind by orchestrating the the events in the lord of the rings. Another issue is that the Valar had the power to crush Sauron at will just as they had the power to crush Melkor at the end of the first age - I think the point is that the host of Valinor was not meant to interfere with the destiny of the children of Iluvatar, sending the Istari was as close as they dared towards interfering in middle earth directly.
As a modest frame challenge, Gandalf did defeat Sauron.
He did it via his own gifts, which was in the inspiration of others to act in a particular direction and to use hope as a method, and to take large risks as a method. He was too wise to go into one-versus-one-duel against Sauron, since that wasn't using his own strength against the enemy's strength. That is the kind of fight Sauron wanted, and for that matter, the kind of fight Saruman wanted.
Gandalf used his strength against the enemy's weakness: pride. I am not sure if Tolkien intended this, but it is an illustration of using asymmetrical warfare against a powerful adversary. The Ring of Power that helped him do this was Narya, the Ring of Fire. (From the link)
In The Lord of the Rings, Gil-galad receives only Vilya, while Círdan receives Narya from the very beginning. In the Third Age Círdan gave the ring to Gandalf for his labours. It is described as having the power to inspire others to resist tyranny, as well as (in common with the other Three Rings) hiding the wielder from remote observation (except by the wielder of the One) and giving resistance to the weariness of time:
"Take this ring, master," he said, "for your labours will be heavy; but it will support you in the weariness that you have taken upon yourself. For this is the Ring of Fire, and with it you may rekindle hearts in a world that grows chill." ― Círdan the Shipwright
This is in stark contrast to the Power of the One Ring
The Ring's primary power was control of the other Rings of Power and domination of the wills of their users. (Carpenter, Humphrey, ed. (1981), The Letters of J. R. R. Tolkien, Boston: Houghton Mifflin, "Letter 131", p. 152,
Gandalf is an equal to Sauron because they are of the same race. Many would claim that the one ring would help but it really is more complex. 1. Yes Sauron's body would be eternally destroyed but his soul still remains in the ring. 2. Gandalf and Saurons souls would the intermingle then fuse as one whole. 3. Now a new being is born Heru Nimthaur, the abominable white Lord.
Indeed, Sauron will be defeated but a new malice will take its place as hydra. Gandalf and Sauron will fuse forever.
