I realise this thread is probably well dead by now, but after sifting through the opinions of the  scholarly LOTRelites, it seems to me that the situation could be explained thus:

Putting aside the fact that Jackson totally made up  Gandalf's staff being broken anyway, if it HAD happened (which makes the whole thing idle speculation, but whatever...) then it wouldn't have meant that Gandalf was lesser than the WK, because, as has been repeatedly said, his power was 'veiled'. If we assume that there is a greater power responsible for setting limits to the power its minions can use on middle earth, then it stands to reason that Gandalf might not be able to defeat the WT, since he is PROHIBITED from the full use of his power. 

Since a staff is just a tool, and not an integral 'component' of a wizard, it doesn't diminish the full potential of Gandalf's power that it be broken, even if Gandalf were not allowed to prevent its being broken, because he has to deal with the limits set on him from 'above'.  

Extrapolating from what others have said, Gandalf was sent back slightly more 'unveiled' than before, as Gandalf the White. Whether or not his mortal form perished in the literal sense is neither here nor there, since 'Gandalf' is quintessentially the entity within. That being said, even if Gandalf had been killed, or could have been killed by the WK - which seems highly unlikely in any place - it wouldn't mean that he was fundamentally lesser than the witchking; it would just mean that he'd been screwed over by the Greater Power which sent him back to Middle Earth which hadn't let him utilise the full extent of his power.

Not to belabor the point (which I probably already have), but if you consider another fantasy world like Midkemia where the magician Pug is to all extents and purposes super-powerful, the same amount of magic goes on anyway, and Pug just seems to sit around doing nothing. That's because if the author put him into action there'd be no story, since he'd win all the battles in about three seconds.

Gandalf, on the other hand is limited by the Greater Power (read Tolkien) so that even though he's probably just as awesome as Pug, he is literally held back from his resources to a) maintain the balance of good and evil; and b) not ruin the story by letting him just kill all the baddies with one 'abracadabra'. 

In summary Gandalf is awesome; he's a team player; he's got an awesome white robe (and various staffs) and is definitely my favorite character from the Trilogy. :-)

I'm so glad someone refreshed this thread so I could find it and read it. It is a very interesting discussion.All of your posts have been so insightful and there's probably nothing I feel I could add into speculations about WK/Gandalf's powers. I wondered what they were thinking when they decide to film that particular scene.

I agree with those of you who wrote that the scene was filmed to give the audience a feeling of uncertainity who will win. There's an ongoing battle between fear and hope  in those movies, and it surely is used as one of those moments.

And since the characters we're talking about are shown and named as White Rider/ Black Rider so much in previous scenes the hint of a direct clash between them was probably a good idea in PJ's mind. Both of the characters - Gandalf the White and the Witchking are quite mysterious in the movies - audience sees that both of them are sort of out of this world, both of them experienced death, have some extraordinary abilities and their "superiors" have to be very very powerful. In the movies they are somehow seen as antagonists, and I think for those, who haven't read the books the idea of battle between those characters had to be fun.

Anyway, what we see in the movies is a merely a small piece of the entire mythology of Arda. So the filmamakers had to operate within their own scope and take into account what they already told the viewers. We saw that Gandalf's staff is a powerful weapon a few times - we saw him breaking a bridge with it, we saw how Saruman try to get it and use it against Gandalf, we saw how Gandalf insisted to have it when he wanted to get into the Golden Hall to heal Theoden and how Grima Wormtongue was afraid of it. So (as the viewers) we can assume that it is a very powerful weapon, maybe even a origin of Gandalf's power. I'm sure that the filmmakers knew the etymology of Gandalf's name, which would also suggest that his staff is a very important part of his character. Both the Elves and Men were using this name, so it might seem accurate that WK also knew him as "Wand-elf"/"Elf of the Wand". Therefore maybe - considering Witchking's arrogance that was hinted on a few occassions in the movies  - PJ wanted to suggest that WK truly believes that Gandalf's staff is the source of his power and by destroying it he can overpower him.

Also...maybe that's the reason why it was cut out of the official movie...too ridiculous, so I wouldn't get too worked up over it...

Exactly. I can see how the scene didn't make it to the final cut.

Oh god, so I watched "Desolation of Smaug" Set aside the feelings I have for the Hobbit prequels. There was this particular scene with (SPOILERS) Gandalf "fighting" Sauron. I quite enjoyed it. Even though... you know. It goes aginst Tolkien-lore. Though I thought it was a pretty cool scene. Nevertheless, Gandalf was not supposed to use his magic to directly confront the evil powers of Middle earth. (Some will argue that he wasn't confronting Sauron, but that he was confronted BY Sauron. So his actions were defensive in nature. Therefore also pure and aligned with the lore of the canon.)

But you know, nothing is perfect. And these are the film ADAPTATIONS, so wtv.

For the kick of it let's  say this is actually how Tolkien wanted it to be. How the F*@*#¤ could the Witchking break Gandalf the white's (gandy v.2.0) staff without any significant resistance. When Gandalf the grey (gandy v.1.0) held out for a relatively LONG time, with a whole bunch of Anor firepunch might I add. Against the spirit of SAURON himself. I originally didn't mind the scene with the witchking that much. But now. All these connections and references. It's just ruining everything. It doesn't make sense. Anyone have any thoughts about this?