He's pretty strong considering he knew how to use a sage mode and a bunch of (somewhat weak) characters from the beginning of the series were also revived.Either Kabuto/Tobi couldn't find his remaining arm, or they thought he wouldn't be good enough to use. Compared to a lot of characters we've seen, Jiraiya isn't as strong as them. And what everyone else above me said.
This might be a silly question, but why would Tobi withhold that? They are basically each other's only ally, after all.Oh they have the DNA. His blood was on Pain's rods. Just that Tobi won't give him either Jiraiya or Shisui's DNA.