Actually the reason Naruto is such a stupid weakling is because he wasted an entire year (and soon to be more!) doing stupid low-ranking missions, as the anime has showed us. Seriously, Sasuke is training against Kabuto while Naruto is running around with a monkey-thing glued to his back.

Uchiha Madara.... I didn't read the translation nd I read the raw very quicky, so I don't remember if it was said that he was the first MS user. Sasuke did say something like "As if I knew that guy".

Anyway, the sharingan just gets stronger as the series flows. From what I've learned lately that kind of eye (red with black dots) has appeared in Japanese culture since before Naruto, but it was only meant to see the opponent's moves in slow-motion... now it creates illusions, black holes and can supress the demons.