Tsunade is not much of a fighter and shouldn't be considered kage level. She is the best medical ninja out there however but in battle prowess not so much. She got owned by Kabuto (lol seriously).
What feats does she hold besides healing people that make her kage level?(Besides Breast)
I lol'd at the fact she had the audacity to step to Pein
She should be running a hospital instead of a village.
Lets just throw this idea out there. Lets say that the invasion of pain happened when the 3rd or 4th hokage had been in power. How would that have turned out differently? Would as many people survived as they did? Yes, Pain did use the Naraka path to revive all those who had died, but think about the lives saved by Tsunade. She utilized that healing transmission technique to ENSURE that her villagers would be saved from an otherwise deadly attack.
(btw, when she stepped to Pain and went to challenge him, "I" assumed it was because she has a responsibility as the leader of her village to challenge any threat made. Would she have won? Meh...)
(another side-note: It is clear that Kabuto has never been all that he seems to be. He is DEFINITELY of Kage level in my book, so for there to be a battle comparison between the two is very unfair. We look back now, and think that she got whooped by him. But we really underestimated his skill when he first arrived. You mean to tell me Kabuto had developed all these skills, perfected the Impure World Resurrection, and implanted Orochimaru's cells in a two year time skip? Impossible. The skills he has are things he has been working on for as long as he's been with Oro, so when he is first introduced, we just know this guy is a medical genius like she is, not the extent of what he was actually capable of.)
The invasion of pain was merely a battle in a war. When fighting a WAR, the best way to win is to have all participate, learn from the BATTLE and continue on with the war utilizing the skills and mindset learned previously. This way, more villagers have experience in battle-scenarios, thus making its members stronger as a whole. Is she the strongest hokage ever? No. But thanks to her, all villagers participating from Konoha in the 4th Shinobi War are more capable soldiers than they would have been.
THAT is what makes her a good hokage. Not physical strength, but utilizing strong battle IQ to make the group, as a whole, stronger. Leadership.