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Evil Vegeta said:Piccolo definitely didn't sense Kaioshin's power. Vegeta was waiting to see Kaioshin fight so they could measure his power. Piccolo couldn't fight because of who Kaioshin was. He didn't even understand why he was feeling that way.
This is a case of the Daizenshuu writers taking this instance and converting it into a fact. That's not to say Kaioshin isn't above Piccolo. Just that Piccolo walking away has nothing to do with that fact.
Shin was only standing, though. There are a lot of situations you can't gauge someone's power because they are not fighting. If Shin couldn't be sensed, they would coment he was giving no Ki at all like they comented at :bitch
I'm not sure if he forfeited only because of power, though. The scene does make a mystery and gives a hype about Shin's idendity, but Piccolo using a term about power when Goku asked about Shin's power and the claim never being contradicted seals the deal for me.