[Pitchwife]

Originally Posted by Gorthaur the Cruel

And what of Melian? Did she not also become incarnate so she could birth Luthien?

Supposing that Melian became incarnate in the same sense/degree as the Istari (which I'm not quite sure of, but maybe), I'd say she did it out of her love for Thingol; giving birth to Lúthien was a natural consequence of that, but hardly the sole end (unless she was a conservative Catholic, which of course is a possibility to be considered).

And because she became incarnate, she had a power over the substance of Arda. Now would this not apply to the Istari, as well, that spiritual beings gain more power when incarnate?

I know the Silmarillion says so about Melian, but I actually find this statement quite puzzling - considering that the Valar and Maiar shaped the surface of Arda to prepare the habitation for the Children of Ilúvatar, and I can hardly imagine them going about that in humanoid form, I'd suppose they had plenty of power over its substance without becoming incarnate. In the Istari, anyway, we see that incarnation rather diminished (or restricted) their power. So what are we to make of this apparent contradiction?
It could be interesting in this respect to compare Melian to Morgoth. In Morgoth's Ring we're told that he diffused much of his power into the substance of Arda in order to imbue it with his evil will, and into his servants and 'creatures' (such as Glaurung and the other dragons). So at the end of the First Age we have Morgoth the tyrant on his throne in Angband (who was incarnate to such a degree that he could be actually executed, in other words killed, by the Valar) + his armies and servants + the part of him that had gone into the very matter of Arda, but only the sum of all three equalled Melkor in his full power as he had been in the beginning.
Maybe Melian did something similar (though with greatly different intent) - i.e. diffuse part of her Maiarin power into the land of Doriath so as to ward it against evil intrusion (and possibly pass another part of it on to her daughter), so that we get another equation: Melian the incarnate Queen of Doriath and spouse of Thingol (+ the part of her power that went into Lúthien) + the power of the Girdle = Melian the Maia as she was before she married Thingol?
So maybe yes, spiritual beings in some cases do gain power of a certain kind by becoming incarnate, but they pay a price for it and diminish themselves on another level.
As for the Istari, I feel they're another matter altogether, as incarnation wasn't the only restriction placed upon them - meaning that even in humanoid form, I guess they still could have danced circles around any elf except for the simple fact that they had been explicitly forbidden to do so.

So would y'all say Luthien was more powerful than the Istari? And if so, in their diluted states, would they also be lower in power than the remaining big shot elves left in Middle-Earth by the 3rd age (Cirdan, Galadriel, Elrond, Glorfindel, Celeborn, Gildor, etc..)?

Nope. Glorfindel may have been the only one who came close (due to having passed through death and reincarnation) - remember he was one of very few at Rivendell who could ride openly against the Nazgûl, whereas Gandalf battled a whole bunch of the N. on Weathertop single-handedly, and with quite spectacular fireworks too. At best they may have been equals. (Generally, though, I must admit I don't find comparing the magical hit-points of characters that fascinating - but don't let that keep you, or anyone else, from doing it to your heart's content!)