Lol, it's funny how people make fun of other people's theories just like how people made fun of Obito theorists before it was revealed Tobi is indeed Obito. People never learn, do they?
Anyway, as crazy as the theory is, there is one logical point in it: Hashirama not being stupid enough to not know Madara is alive. Hashirama most likely considered Madara a friend, a comrade. After all, they created Konoha together, forming the strongest village with the union of the two most powerful clans. I'll have to agree with the OP on this one until proven otherwise, Hashirama never intended to kill Madara, and quite possibly left him alive. And he didn't have to lie to Konoha either. Maybe he said Madara was defeated and people took that and thought Madara died.
Uchihaferdinand, don't listen to the flamers who reject your theory because you are possibly right. Just look at how people were flaming and trolling Obito theorists, and look at the result of all of that.