I think that what you have is great after Kakashi becomes serious about training them but for the VERY FIRST introduction I think both sasuke and Naruto are already way over powered. The character development is too rapid especially if this story is meant to be realistic (think of how long it takes to truly learn something).
These are little kids at this point, even if they are being trained by a hokage and a hokage candidate. They are still in school, learning about the basics of jitsu. There is no way that at this point naruto has insane wind jitsu and sasuke has learned 2 natures.
Heck it is much more likely that if his mom is alive then she would do everything in her power to protect her son from the fox/village, not go and intentionally put naruto/ the village in danger by having him play around with the seal to see how much can come out. In fact she would do the exact opposite use her most advance seals to keep the fox at bay(remember she has unique chakara to suppress the fox)/ have the Hokage (idk about danzo) not only check the seals daily, but to train him in managing the fox's extreme side effects.
Side note: Naruto's mom isn't the only seal master that knows about Naruto's seal. You have J-man, the 3rd hokage, and Danzo who are very knowledgeable on seals and specifically Naruto's.
In addition if you take my idea of the tailed beast abilities the fox was the raw chakara of the 10 tails. This means he has total dominance over the chakara control of the user/ has debilitating side effects if the fox's foul raw chakara is released in a major amounts... such as the chakara literally eats away the body of the jinkuri. (side note: this is why in my version that the village choose the uzumaki to be the jinkuri out of every other clan. It was because their bodies were so highly resilient to the rapid and excruciating physical augmentation)
Another side note I just thought about: Toto make this story even more realistic Naruto's mom might lie and tell him that he has special learning disabilities and needs the hokage's help in helping him learn jitsu (later on he finds out about the lies and the fox.... could even have the fox temporarily take over naruto's body and kill his mom in the process) LoL naruto= mentally scarred for life.....
Overall I would suggest that the very first arch he has learned F/D rank ninjitsu, B rank tiejitsu, B/C rank sealing (from mom).
Sasuke is also a child still. He has just witnessed his entire clan murdered by his brother. In till this point(cannon) he has just barely managed a single fire ninjitsu.... which in cannon received praise because he mastered it at a VERY young age. It is at this point in your story he comes to be trained with the Hokage... and I assume to possibly even to live with naruto's mom(since both of their moms were close) I would say that with the hokage/ danzo training him he should be well versed in abilities of the sharingan (no activation), C rank in sword play/ kuni abilities, C rank in 3-4 fire ninjitsu, 1 B rank fire ninjitsu and C rank in tiejitsu.
Plus this will compliment one another because Naruto can hit up close, while Sasuke can hit from mid to long range.
As for lazy Kakashi I totally agree maybe some tracking, or he could just be too into the porn to even teach them anything. (I like the second one better
!
Sakura 1st arch I entirely agree. She can be a dictionary.... little like harmoney in Harry Potter
Okay, well I am going to use your suggestions for the tailed beasts, but I hadn't thought about the effect their properties would have on their jinchuuriki, nice call.
As for Naruto and Sasuke's abilities, I think I should detail how the rank system will work for jutsu and shinobi.
E - Average Genin
D - Talented Genin/Average Chuunin
C - Talented Chuunin/Special Jounin
B - Average Jounin
A - Elite Jounin
S - Complete Mastery
On this scale, Naruto and Sasuke are middle D's at the start of the story. But I think I miscommunicated when the story really begins.
Chapter 1
- Goes over the Kyuubi Attack
Chapter 2
- Skims through Naruto's childhood with his mother, and then his childhood with Sasuke up until the Uchiha Massacre
Chapter 3
- Skims through the rest of Naruto and Sasuke's life up until they graduate
Chapter 4
- Goes on at a normal pace from there
So as you can the see, the story only
really begins in chapter 4, when they're already like 13, and have just graduated.
At this point they will be D ranks.
Naruto won't have any actual jutsu he can use, although he is learning to control his wind nature chakra with Danzo, so that at a later date he will have a head start for learning wind ninjutsu.
Sasuke already has one C rank fire jutsu (Grand Fireball, since its an Uchiha technique he just nicked the scroll and learnt it) and a few other D and E rank lighting jutsu.
They have both of course started on learning to utilize weapons in combat. Sasuke with a Tanto, and Naruto with a Machete like sword built for hack and slash.
Naruto has also made some headway as far as tracking, trapping, tactical planning, and sealing are concerned. His greatest of those skills is sealing, which he has a C rank certification in.
Sasuke hasn't done much but focus on his ninjutsu, and taijutsu. However his Sougujutsu(Use of Ninja Tools) is rapidly improving and already at a high D rank.
As for Naruto's seal, my thinking is that Minato didn't make it himself. The Sage was the one who gave humanity a book full of every simple seal segment possible. Humans then went about combining the segments to actually make them do something. The Uzumaki clan was the last known clan to possess the book of seals. Most other clans didn't really care that they had it since they couldn't really figure out much anyways.
At some point one of the Uzumaki created the death god seal, and died after using it. It was branded a kinjutsu, and even then it was a kinjutsu to even study, since you couldn't use it without studying its mechanics.
The Uzumaki gave Konoha some of the seals in their book, and this was one of them. Minato researched and figured out what he did by reverse engineering it after he became Hokage and gained access to the book.
Kushina helped him in his endevour to figure out the seal. But after he dies, she's the only one who knows how Minato's modified version works, and she's also the only one who knows how the original works either, although she does teach Hiruzen and Jiraiya how to use that one.
But I agree, and now I won't have her change Naruto's seal in such a manner. However Kushina is far from stupid, and she knows that Danzo will do anything to get a jinchuuriki that is at full strength, that's why when Danzo says that he will bring in his own sealmaster to tamper with the seal, Kushina then says that she will do it herself, although she does so much more tentatively.
I think that I'll say that thus far she has only managed to weaken the kyuubi's control on Naruto's chakra... that is that's what she did say BEFORE she died.
As for her death, I already had a plan for that. Part of the plan was meant to link to when Naruto runs away from the village, and the two guys who guard the village, I think their names are Izumo and Kotetsu.
The plan was to have Kushina taking Naruto to meet Jiraiya on a holiday-esque thing they often do. Hiruzen tells her to wait so that he can assign her some A ranks as bodyguards. She refuses and insists that a Jounin and a team of Chuunin.
Hiruzen agrees and gives her a high B rank Jounin and a team of three Chuunin. During their trip it turns out that one of the Chuunin informed a clan from Iwa of their travel path. They are intercepted and completely outnumbered.
Kushina knows that she and Naruto could potentially get away if the ninja stay back to buy them time, and to be honest it technically is their job. However she knows that it was her decision that brought them here, and especially the two Chuunin are two young to die like that.
So she gives Naruto to the two Chuunin, who happen to be Kotetsu and Izumo telling them to look after him, and she stays back with the Jounin and buys them time to escape. Of course she is killed, but don't worry, Jiraiya hears word of this and intercepts the clan on their way back to Iwa and retrieves her body. Lets just say that their confrontation ended with the extinction of that clan.
Either way, when Naruto tries to flee the village (about two years or three years from chapter 4), he and his other escapee/s are stopped by the two gate guards. Naruto manages to talk them out of stopping them, and they actually serve to "mistakenly" distract the pursuing ANBU.
As for Kushina lying to Naruto about the kyuubi and whatnot, I'm not so sure. Keep in mind that in my story, the Hokage does not have absolute control, and as such he is overulled, even by Clan Heads like Inoichi, Shikaku and Shibi, and they all say that for Konoha's safety, Naruto needs to be trained as a jinchuuriki.
So if his fate is already sealed in that manner, I just don't think Kushina would lie to him, it would be counter productive due to the fact that at some point Naruto is expected to train in using the kyuubi's chakra. At the same time, I could say that she doesn't come right out and tell him anyways, because you don't tell little kids stuff like that.
So what do you think?
EDIT
Sorry to edit such a long post, but I was re-reading you post and realized that you were under the impression that Kushina was alive. I've already explained that she dies above, and it stands for me to point out that she dies when Naruto is 6, and he then lives with Sasuke's family until the massacre (age 8), and he then lives with Sasuke and the other Uchiha kids (all younger than Sasuke bar one who's Sasuke's age) left alive, although he and Sasuke move out a year before they graduate.
We have talked about almost everything we can and I think I understand your story. So just take these last suggestions and start writing, no need to explain to me why you choose to do what you did. I will read it and make some suggestions. Now get to work 
..... :hooray: